NFA Hikes Margin Requirements for Norwegian Krone and Mexican Peso

The US National Futures Association (NFA) said on Friday it would temporarily require traders to put down additional margins when they enter into currency trades involving the Norwegian Krone and Mexican Peso.

The Chicago-based regulator, which is responsible for policing the US futures industry, is moving to restrict the amount of borrowed money, or leverage, to counter the massive recent devaluation of these exotic pairs.

Both Norwegian and Mexican currencies touched multi-year lows as concerns over the corona is keeping markets in a risk-off modus, which spread into investor sentiment on emerging market currencies.

As per a notice published on NFA’s website and requiring the immediate attention of its 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 Dealer Members, the move will require investors to put a “minimum security deposit” of 7 percent of their trades on the Norwegian Krone. The self-regulator also said traders would have to set aside 12 percent of their leveraged bets on the Mexican Peso.

FX brokers raise margins customers have to deposit

“Given the recent 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 in the currency markets, and the margin increases that CME and ICE have implemented with respect to foreign currency futures involving the Norwegian Krone and Mexican Peso, the Executive Committee has determined to increase the minimum security deposits required to be collected and maintained by FDMs under NFA Financial Requirements Section 12,” the NFA added.

The NFA statement says its executive committee can temporarily boost security deposits—a move that limits leverage—during periods of “extraordinary market conditions.”

The National Futures Association self-regulates futures trading and is itself supervised by the US Commodity Futures Trading Commission (CFTC). Both watchdogs were given massive new responsibilities under the Dodd-Frank law, including setting requirements for how much borrowed money, or margin, the firms’ clients can use on currency trades.

As Finance Magnates reported earlier, many FX brokers said they would take special measures in anticipation of higher volatility and trading volumes. The ‎announcements come as most online brokers have already ‎‎ironed out their plans to protect ‎themselves and their customers from any ‎sharp ‎market shifts that have the potential to wipe out account balances in an ‎instant. ‎