OANDA pauses trading next Sunday - worried about Greek elections

It seems brokers worldwide are very concerned with the outcome of the Greek elections taking place this coming Sunday, June 17th. Yesterday Saxo Bank announced that it's doubling the required margin for the CHF currency. The concern is that Greek elections may be the beginning of Eurozone's meltdown sending markets on a roller coaster ride resulting in large losses for either traders or brokers or both.

This is what Tony Savor, OANDA Chief Technology Officer, had to say about OANDA's decision:

Yesterday, OANDA announced that it would halt trading this Sunday, June 17, from 6:00 AM EDT until approximately 3:00 PM EDT. I would like to further explain OANDA’s reasoning for this action.

First off, OANDA is the only Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term provider that permits off-market, weekend trading. In truth, volumes during the weekend are much lower than typical trading days, but OANDA has made this available as a service for its clients rather than an opportunity to increase corporate revenues.

The decision to halt trading is very-much tied to the uncertainty in Europe and in particular, the Greek election. Given these events, there is the potential for extreme exchange rate Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term at a time when global currency markets are closed. OANDA’s concern is that exchange rates could undergo significant fluctuations as the exit polls are being made public. If these fluctuations are wide enough, accounts that under normal conditions would be considered well-capitalized, could become subject to a margin call.

By halting trading and holding the closing prices steady during this period, we aim to shelter traders from the potential for price spikes. Of course, once trading resumes, new market rates will come into effect and while the hope is that prices will have settled by this time, some accounts may still face the risk of a margin call.

This is why we have issued a warning recommending that traders reduce positions if they determine they are vulnerable from a margin perspective. At the very least, all traders should review their accounts prior to the weekend and ensure they have sufficient capital to prevent a margin call when trading resumes at the new market price.

On a final note, anyone with open positions during this time, regardless of their choice of forex broker, is at risk when exchange rates reset upon the resumption of trading. Yes, sending out this message is to inform our traders of the trading halt, but it is first and foremost intended to inform the investing community of the potential volatility in the coming days and to provide sufficient time to make any necessary adjustments.