Canadian Self-Regulatory Organization Updates Margin Requirements

The Canadian self-regulatory organization IIROC has issued an announcement highlighting some changes to the margin requirements which traders have to put up as collateral with their brokers if they are willing to trade certain pairs.

Today’s decision marks the second amendment to the margin requirements for Canadian clients of over-the-counter retail foreign exchange services and reflects increased Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term across several pairs. After the margin requirement on the Canadian dollar versus the Japanese yen has been jacked up to to 5.0 per cent from the previous 3.8 per cent level, the U.S. dollar counterpart is next.

Excessive volatility in the exchange rate of the U.S. dollar against the Canadian dollar, which is primarily a function of oil prices, has prompted the self-regulatory organization to increase margin requirements to 2.9 per cent from 2.4 per cent.

The change cements Canada as one of the jurisdictions which are enforcing the tightest controls on margin requirements. In its unique regulatory framework, the foreign exchange brokers operating in Canada are required by law to comply with a set of rules setup by the Canadian self-regulatory organization of financial sector - the Investment Industry Regulatory Organization of Canada (IIROC).

With the rates of the U.S. dollar against the Canadian dollar and of the Canadian dollar against the Japanese yen fluctuating wildly, the margin requirements are reflecting probably the toughest regulatory stance after Japan, where 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 for retail traders is capped at 1:25.

With the CAD/JPY pair being limited to 1:25, the leverage that traders use when entering USD/CAD trades is 1:34.5.

The relative decrease in the volatility of the Norwegian krone has prompted the self-regulatory organization to reduce margin requirements on the USD/NOK pair to 3 per cent from 3.8 per cent.