Rising geopolitical tension between North Korea and the US has had traders and brokers scurrying for cover over the last week or so.
Though both countries are in the habit of exchanging barbs on a regular basis, the latest escalation in tension seems to be of a much serious nature. It has led to a risk-off mode in the markets, causing stock markets around the world to move lower and sending the prices of gold skyrocketing.
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While these price movements have affected traders, brokers are also finding it difficult to adjust their margins with the entities that they deal with. This led to Saxo hiking its margin requirements last week, and this week we have seen FXOpen and Invast, two large FX and CFD brokers, inform their clients that they would be increasing their margin requirements too.
While FXOpen has left it a bit open by saying that it “may” increase margins by “up to” 5 times their normal values anytime starting from 17th August, Invast has been more forthright in saying that it will increase margins from 17:00 New York Time on 15th August, 2017.
While FXOpen has said that it could increase margins for all the instruments on its platforms as it deems fit, Invast has specified that the margin increase to 3% would apply only to all yen related pairs, gold, old and index CFDs, which is logical considering the fact that these are likely to be the most affected at times of high global risk.
The tension between the countries has shown signs of relaxing over the past few days and traders are hoping that this increase will be short lived, though the measures taken by the firms are very sensible from a risk management point of view.