Canadian Dollar's Rapid Decline Prompts Trading Margin Requirement Hike in Canada

Rapidly falling oil prices are causing quite the stir in the prices of commodity-based currencies, such as the Canadian dollar, the Norwegian krone, the Russian ruble and others. The latest batch of 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 has triggered a decline of the Canadian dollar's exchange rate to its US counterpart to the lowest level since 2009.

Trading today around 1.20 to the US dollar, only a couple of years after reaching parity, has driven the Loonie’s appeal lower in light of the prospective economic challenges which a protractedly low price of oil is posing for the Canadian economy.

The Canadian self-regulatory organization in charge of the regulatory environment in the country is one of the strictest in the world and has a very unique structure. The Investment Industry Regulatory Organization of Canada (IIROC) is at the center of the framework and regularly updates foreign exchange margin trading requirements depending on FX volatility.

IIROC has issued a revised table for all margin requirements of different currency pairs, with the notable change in the leverage ratio of the US dollar to the Canadian dollar and the Norwegian Krone versus the US dollar.

Starting from January 15th, the margin requirements on the USD/CAD pair will be raised from 1.6% (1:62) to 1.9% (1:52), while on the USD/NOK, 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 traders in Canada will have to put up 3.40% or 1:29 (up from 3.00% or 1:33).

The list is updated by IIROC every time there are changes to the margin requirements in the most popular traded currencies. The organization determines the appropriate FX margin requirements according to a certain volatility threshold which is different for every currency group.

IIROC Canadian Margin Requirements