The Investment Industry Regulatory Organization of Canada (IIROC) today announced a pending increase in margin requirements on the U.S. dollar (USD), following a periodic change in volatility, according to an IIROC statement.
Based on the volatility of the U.S. dollar exchange rates, effective August 18 2016 the margin requirements on the Norwegian krone / U.S. dollar pair (NOK/USD) will be raised to 3.50% from 3.00%.
A full list of the IIROC’s rates, including its basket of twenty-one currencies as of August 18, 2016, can be accessed by the following link. This list is updated when a currency’s spot margin rate is increased or reduced, because the volatility of the currency exceeds (or no longer exceeds) the volatility threshold that is set out in Dealer Member Rule.
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Excess volatility in a currency is measured and tracked as an “offside day”. An offside day is triggered when the percentage change in the exchange rate of the currency over five-day intervals, through a period of 60 trading days, exceeds the margin rate for the currency. And when the number of offside base days during the period reaches 4, a margin surcharge is applied.
This list of foreign exchange spot risk margin rates replaces the previous list provided in IIROC Rules Notice 16-0165, issued on July 11, 2016.
IIROC is a non-profit self-regulatory organization (SRO). It oversees all investment dealers and trading activity on debt and equity markets in Canada. IIROC was established June 2008 through the merger of the Investment Dealers Association of Canada (IDA) and Market Regulation Services Inc. (RS). In addition, the group enjoys a unique structure as it regularly updates FX margin trading requirements subject to FX volatility.