On Thursday 23rd of June 2016, the UK will vote on whether or not to remain a member of the European Union. This is likely to cause volatility across global markets, thus we will be making some changes to our EUR currency pairs margin requirements. We have taken the decision to increase the margin requirements for all EUR pairs by a factor of two, with the change being effective from the 20th of June 2016.
This means that leverage on all EUR pairs therefore will be two times lower. E.g. if account leverage is 1:400, then effective leverage applied to EUR positions will be 1:200.
Please be reminded that on the 13th of June 2016 we increased the margin requirements for all GBP pairs by a factor of four. This means that leverage on all GBP pairs is four times lower. E.g. if account leverage is 1:400, then effective leverage applied to GBP positions will be 1:100.
Global Margin Changes:
In anticipation for this event, institutional brokers have been increasing margin requirements as well for us retail brokers. For all pairs, our liquidity providers will be providing a maximum leverage of 1:25 until the event has passed and subsequent volatility has subsided. These are protections put into place to prevent over-leveraging and clients attaining potential negative balances. Therefore, we will be instituting the following protections for our clients:
1) Effective 22nd of June 2016, the maximum leverage on all new positions opened will be set at 1:100. This will be for all trading instruments. All positions opened prior to June 22nd and currently open will not be affected.
– For example, an account with 1:200 leverage opens up 1 standard lot of USDJPY on June 21st. The margin requirement is $500. This position is held into the next day on June 22nd and another 1 standard lot position is opened on USDJPY in the same direction; the margin requirement for the first trade is still $500, but the margin requirement for the second trade will be $1,000 as the maximum leverage for all pairs is 1:100 for all trades opened up on June 22nd.
2) Effective 23rd of June 2016, the maximum leverage on all new positions opened will be set at 1:50. This will be for all trading instruments. All positions opened prior to June 22nd and currently open will not be affected. All positions opened on June 22nd and held into June 23rd will remain at a maximum leverage of 1:100 as discussed above.
– In the previous example, an account with 1:200 leverage opens up 1 standard lot of USDJPY on June 21st. The margin requirement is $500. Then on June 23rd another 1 standard lot position is opened on USDJPY in the same direction; the margin requirement for the first trade is still $500, but the margin requirement for the second trade is $1,000. On June 23rd, another trade is opened up on USDJPY in the same direction for 1 standard lot. This trade will require $2,000 worth of margin as the maximum leverage on all pairs is now 1:50.
In summary –
EUR pairs margin requirement will double on June 20th
Maximum leverage on all new trades opened on June 22nd will be capped at 1:100 leverage on all pairs
Maximum leverage on all new trades opened on June 23rd will be capped at 1:50 leverage on all pairs
Please note that for all non-EUR and non-GBP pairs, these margin changes will not affect any orders that have been opened prior to June 22nd. While most liquidity providers and retail brokers are limiting margin for all open positions regardless of when they were opened, we want to ensure that clients still maintain the flexibility to manage their positions they had open previously.
It is anticipated that these will be short term measures in order to manage the risk of this upcoming event. Once market conditions have returned to normal after the referendum, our trading conditions will return to normal. We will make an announcement at that time.
