NFA Changes Margin Requirements on Forex Trades

NFA lowered the margin required for CHF trading for the first time since the SNB's Black Swan in 2015.

The US National Futures Association (NFA), the agency responsible for policing the futures industry in the United States, said it would temporarily raise margin requirements on the forex futures involving the Mexican peso, Japanese yen, and New Zealand dollar, effective December 5, 2016.

NFA has required traders to increase the minimum security deposits collected and maintained by the Futures Commission Merchant (FDMs) to 8 percent for the Mexican peso and 4 percent for the Japanese yen. The self-regulator also said that investors who enter into FX trades involving the New Zealand dollar would have to post a minimum margin of 3 percent of notional value of their transactions.

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In addition, the Executive Committee has also determined to reduce the minimum margin requirements for currency trades involving the Swiss franc to 3 percent, down from the current 5 percent. In January 2015, NFA boosted the security deposits required for trading the Swissy—a move that limits leverage— following steep losses suffered by traders and brokers in the wake of the Swiss National Bank’s decision to remove the 1.20 floor on the EHR/CHF currency pair, a decision almost no one saw coming.

The changes are part of Section 12 of the NFA’s Financial Requirements which allows the executive committee to temporarily restrict the amount of borrowed money, or leverage, under extraordinary market conditions.

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