US Watchdog Enforces Higher Margins on FX Crosses, 3% on JPY & AUD
Retail FX brokers in the USA will be adhering to regulatory requirements to increase margin values on certain major and
The NFA has made a formal announcement to regulated broker-dealers offering OTC foreign exchange instruments. The regulator advises brokers to implement increased margin levels on five currency pairs. The move follows on from an earlier announcement made in the week which had a similar request.
The NFA’s executive committee has made a second crucial announcement in respect to the margin levels brokers charge clients to open positions. The financial watchdog identified five currency pairs that require changes in the amount of margin brokers offer them at. US brokers offer a maximum of 50 to 1 or 2% margin on major crosses, the current news requests brokers to increase the margin on the Japanese yen and Australian dollar to 3%. In addition, the watchdog has requested brokers to increase margins on exotic pairs, including the Brazilian real, Mexican peso and Russian ruble.
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The NFA notification states: “As you know, on Jan. 21, 2015, NFA’s Executive Committee exercised its authority under NFA Financial Requirements Section 12 and increased, until further notice, the minimum security deposits required to be collected and maintained by FDMs under Section 12 for transactions involving the Swiss franc (5%), Swedish krona (3%) and Norwegian krone (3%).
At the time of those increases, NFA alerted FDMs that NFA was continuing to monitor market conditions and that the Executive Committee could decide to make additional increases to these or other currencies if market conditions warranted. Given the continued volatility in the foreign currency markets, the Executive Committee has determined to increase the minimum security deposits required to be collected and maintained by FDMs under Section 12.”
Leverage Changes
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Major Currencies:
Japanese yen – 3%
Australian dollar – 3%
Other Currencies:
Russian ruble – 20%
Brazilian real – 9%
Mexican peso – 6%
The measures will take effect from 5 p.m. (EST) on Monday, January 26, 2015 and will remain in effect until further notice, the watchdog states.
Leverage has been a key talking point after brokers and traders suffered during one of the biggest market moves of the decade when the Swiss central bank tweaked its interest rate and peg, thus affecting the price of the currency against euros. Brokers such as Alpari UK offered traders up to 500 to 1 leverage, a core reason behind the downfall according to market practitioners.
Not sure why they didn’t limit the leverage depending on the account balance. 1:33 isn’t a lot for a small account.
That’d probably be asking a bit much for politicians to understand.
Hi Chooks, thanks for the comments, and you bring some valid points in my opinion. Actually we did ask why only two weeks notice was given, and why the email came ahead a few days earlier than expected. However, the answers weren’t as insightful as you might have expected thus weren’t included (such as how whether two weeks or two months – most clients would have enough time). I am not sure what parts of the article you think are PR-like, there are a few comments from the interview, the explanation of what they are focusing on next, and my… Read more »
Hi Chooks, thanks for the comments, and you bring some valid points in my opinion. Actually we did ask why only two weeks notice was given, and why the email came ahead a few days earlier than expected. However, the answers weren’t as insightful as you might have expected thus weren’t included (such as how whether two weeks or two months – most clients would have enough time). I am not sure what parts of the article you think are PR-like, there are a few comments from the interview, the explanation of what they are focusing on next, and my… Read more »
Oh my god they are all crazy. Shoot first, ask questions later. Yes NFA you are right. Why should trader need such ridiculous things like a leverage… Pah… Let’s decrease it to 1:1. I cannot understand that decision.
usa regulatory clowns always rush in after the horse is out of the barn.
same crap, different day.
yawn,