FX Leverage Cut to 20:1 in Singapore

New retail trading regulations came into effect this Tuesday in Singapore.

Traders in the small nation-state will now have their access to Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term cut by more than half.

The new rules, which were put forward by the Monetary Authority of Singapore, mean retail investors now only have access to 20:1 leverage. Previously, traders only had to meet Margin Requirements Margin Requirements A margin requirement is defined as the minimum equity sum that investors must keep in their margin account preceding a trading transaction. Margin requirements may be referred to as maintenance margin, minimum maintenance, or maintenance requirement. This is a requirement for broker trading in any asset class.In terms of equities, the New York Stock Exchange (NYSE) and Financial Industry Regulatory Authority (FINRA) have a fixed margin requirement of 25% of the sum value of the securities presen A margin requirement is defined as the minimum equity sum that investors must keep in their margin account preceding a trading transaction. Margin requirements may be referred to as maintenance margin, minimum maintenance, or maintenance requirement. This is a requirement for broker trading in any asset class.In terms of equities, the New York Stock Exchange (NYSE) and Financial Industry Regulatory Authority (FINRA) have a fixed margin requirement of 25% of the sum value of the securities presen Read this Term of 2 percent - meaning they had leverage of 50:1.

As with the regulations put in place by the European Securities and Markets Authority in the Summer of last year, there are some 'loopholes' to Singapore's latest retail trading rules.

Going pro

For instance, if you qualify as an accredited investor in Singapore, then you can still access leverage of 50:1. Like in Europe, however, becoming an accredited investor isn't that easy.

To qualify, you must have personal assets of more than 2 million Singaporean dollars ($1.5 million). Alternatively, you can qualify by having more than 1 million Singaporean dollars in cash or by earning more than 300,000 Singaporean dollars a year.

Changes to the regulations are unlikely to have caught any brokers active in the country by surprise.

The MAS has been mulling changes to leverage for years. Like other regulators, the Singaporean financial watchdog has said that high leverage poses risks to retail traders.