Alpari Suspends Ruble Trading as Extreme Volatility Forces More Brokers to Limit Leverage

Russia-based broker, Alpari just stopped Ruble trading saying: "Due to the lack of Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term and trading instruments USD/RUB EUR/RUB are temporarily suspended." More retail FX brokers are notifying their clients right now that trading conditions on ruble pairs are tightening considerably, effective immediately or at the end of the day at most.

The brokers are forced to take these Risk Management Risk Management One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, One of the most common terms utilized by brokers, risk management refers to the practice of identifying potential risks in advance. Most commonly, this also involves the analysis of risk and the undertaking of precautionary steps to both mitigate and prevent for such risk.Such efforts are essential for brokers and venues in the finance industry, given the potential for fallout in the face of unforeseen events or crises. Given a more tightly regulated environment across nearly every asset class, Read this Term measures, limiting maximum margin or widening spreads, due to the recent extreme volatility in the Russian ruble. At 01:00 AM Moscow time last night, the Bank of Russia hiked rates to a record high of 17%, sending the currency into another wild ride.

The large Russian broker, TeleTrade, has just announced it is opening the spread on its USD/RUB CFD by 50% from 800 to 1200 points. Its Russian competitor Alpari already limited leverage yesterday. Alpari set the maximum leverage for ruble pairs on standard accounts to 50:1 for positions up to $1.5 million, 25:1 for positions up to $3 million and 10:1 for positions upward of $3. Today and until further notice will be received, Alpari clients can only close ruble positions and not open any new ones at any leverage at all.

Meanwhile on the institutional side, yesterday the Moscow Exchange was also forced to change its minimum initial margin rates to 10% on all levels for all currencies following its "risk parameters." No other explanation was given by the leading Russian trading venue.

Dukascopy, the retail Swiss broker, provided an explanation of its moves in an announcement yesterday saying: "Due to the high volatility and low liquidity on the USD/RUB currency pair there is a risk of significant price gaps, which may cause negative equity on client accounts. Because of that Dukascopy Bank and Dukascopy Europe are forced to implement a maximum leverage for USD/RUB exposures of 1:10 as of 17 December."

The Swiss announcement also carried a stark warning: "Beware that independently of the current leverage reduction Dukascopy Bank and Dukascopy Europe may take additional measures including full stop of USD/RUB trading and closure of all opened positions without warning."

Last month, as brokers such as XM and the Russian Forex Club took similar proactive measures to limit traders' Rub exposure, we wrote that the worsening situation of the Russian economy and the crisis in the Ukraine might lead to the rush to limit the leverage that we are seeing now.

Speaking with Forex Magnates Philippe Gelis, CEO and Co-Founder of the Kantox FX platform, commented on the larger situation: “The rapid depreciation of the Russian rouble will be a cause for panic amongst European businesses with operations in Russia. Such concern is understandable; their profits are likely to be hit by rising prices within Russia and it is becoming increasingly difficult to move money out of the country."

He added: “The European companies that are likely to prosper in Russia are those that establish long-term strategies to limit damage, rather than making knee-jerk responses to market developments in panic. Hedging against rouble risk, while freezing prices to ensure currency risk is not passed onto customers is one way to reduce the damage of the depreciating rouble for European companies. In the longer term, companies with a subsidiary in Russia should consider opening a rouble bank account in their home country to make it easier to process transactions.”