US-listed and headquartered online FX broker FXCM Inc. (NYSE:FXCM), has issued an email update to clients informing them of several changes that it plans to implement regarding its CFD and FX offering, as well as its decision to liquidate all open USD/HKD positions this Friday on February 26th 2016.
The company said it believed there is a chance of disruption and highly illiquid conditions in the coming weeks on the USD/HKD pair, and made the decision in an effort to mitigate customer losses. The notice included that no new positions in the pair will be permitted, effectively discontinuing the offering of the United States dollar versus the Hong Kong dollar (USD/HKD).
Indeed, there is growing consensus that the HKD peg may be abolished after running for nearly 30 years, thus potentially creating a black-swan style move in the currency or a repeat of the CHF-anomaly of last January in the HKD. Such an event almost put FXCM out of business last year, therefore, the company is trying to take proactive steps with regard to its management of counterparty risk.
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Hour break added to three major index CFDs, and revised margin requirements
In addition, the email update provided that there will be a trading break period added to certain US CFD contracts in the US30, SPX500, and NAS100 instruments, coinciding from 22:00-23:00 GMT, in addition to the 21:15-21:30 GMT break. It will thus affect the after-hours trading session during which stocks can be volatile from earnings or news reported after the close of the market.
In addition, the company is increasing margin requirements for certain pairs and USD-denominated accounts (and some additional denominated accounts), for a number of EUR-related pairs and other cross pairs across the 100:1 leverage category, as well as 200:1 and 400:1.
The margin requirement was also lowered for many accounts (balances) denominated in CAD, JPY, AUD, CHF, and EUR with the largest increases in margin seen for USD denominated balances. The company updates its margin requirements across pairs and leverage tiers on the last Friday of each month to account for price fluctuations according to FXCM.