NFA Raises More Margin Requirements

Following its announcement last week that it would raise the minimum security deposits for transactions involving the Norwegian krone, the Swedish krona and the Swiss franc, the US regulatory body announced that it will also be changing the margin for Forex brokers offering five other currency pairs. Although US brokers can currently offer leverage up to 50:1 (2% margin) on major currency pairs, the NFA announced its intention to raise the margin on two popular currencies, the Japanese yen and the Australian dollar, to 3%. The NFA also increased the margins on the Russian ruble, the Mexican peso and Brazilian real. The changes for these exotic pairs were increased to 20% for the ruble, 9% for the real and 6% for the peso. All increased margins will be valid until further notice. Though such limits may restrict profits on these pairs they also prevent extreme losses which, after last week's challenging volatility, may be some form of relief for traders.

FXCM, one of the leading Forex brokers worldwide issued a statement on January 21, 2015 stating that it will adjust its margin requirements globally for all Forex instruments and for gold, to make the global margin requirements consistent with the firm's US entity, FXCM LLC which has always had more conservative requirements as per the demands of the NFA. Despite rumors of trouble at FXCM, the industry leader has shown itself to handle recent losses with notable grace, responsibility and with an eye towards a strong future. The brokerage's decision to keep the public fully aware of internal decisions, bailouts and policy changes is an excellent step in maintaining (and restoring) confidence for both retail and institutional traders worldwide.

Gain Capital, the parent company of Forex.com, has also publicly acknowledged its own conservative approach; the broker was one of few that raised margin requirements for EUR/CHF in September 2014, making it possible for the broker to profit from the SNB decision and to weather the volatility without any major fanfare.

Though many traders enjoy the risk of high leverage and relish in the rewards (or potential rewards), it seems that the cautious policies of the NFA will be rolled out globally to help protect traders and brokers from dangerous losses.

Sara Patterson
Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.