Breaking: NFA Raises Margin Requirements for Swiss Franc, Swedish Krona and Norwegian Krone

Following last’s week Swiss franc volatility and fallout, which leverage played a large part in, speculation arose that the event would trigger a focus on margin requirements by regulators. In what could be the first of many similar announcements from global regulators, the US National Futures Association (NFA) has become the first major financial supervisor to issue new guidelines about margins following last week’s event.

Effective Thursday, January 22nd at 5PM Central Time, the NFA is temporarily increasing margin requirement transactions in the Swiss franc, Swedish krona, and Norwegian krone. For the franc, minimum margin is being raised to 5%, the krona and krone at 3%. Each currency had been previously set at 2% margin, or 50:1 leverage.

While the changes to the franc fall within conclusions numerous brokers around the world have independently arrived at over the last week, the inclusion of the krona and krone reveal that the NFA is eyeing other currencies that could see a collapse in their Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term if volatility rises. The changes are part of Section 12 of the NFA’s Financial Requirements which allows them to temporality increase margin “under extraordinary market conditions.”

While officially a temporary change, among global regulators, the NFA’s Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term requirements are some of the toughest with margin requirements well above European counterparts, as well as high minimum capital requirements for forex brokers. As such, the current changes could be the prelude to ongoing discussions among NFA members for tighter margin rules in the future.