US-based retail broker FXCM has announced that it will temporarily increase margin requirements from 1 percent to 2 percent for selected currency pairs with effect from Friday 4th November in anticipation of market volatility ahead of next week’s US presidential election.
According to the statement, the company will reduce margin requirements back to pre-election levels as soon as market conditions permit. The thirteen currency pairs that will see higher margins of 2 percent include EUR/USD, USD/JPY, GBP/USD and USD/CAD.
The USD/MXN margin requirements will rise from 4.6 percent to 10 percent, the USD/SEK margin will increase from 3 percent to 6 percent and the USD/NOK will move from 1.5 percent to 3 percent.
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The new margin levels will come into effect from 5.00 pm EDT (21.00 GMT).
FXCM joins a list of retail brokers that have raised margin requirements in the run up to the election. With the Mexican peso being the barometer of Trump’s fortunes, a victory would see a substantial depreciation in its value. Hence, the move has been implemented as the outcome still poses a high risk.
Early last year, both FXCM and a number of other brokerages were hit hard by the Swiss National Bank’s sudden move to scrap its cap on the value of the Swiss franc versus the euro.
The move caused the euro to suffer its biggest-ever one-day fall against the franc, which fell 18 percent for the session and lost around 30 percent on an intraday basis. The firm lost over $200 million following the SNB’s action.