Canada’s IIROC Changes FX Spot Risk Margin Rates

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The Investment Industry Regulatory Organization of Canada, or IIROC, has made an announcement. This announcement is in regard to changes that it will make to the FX spot margin rates within the Canadian and US base currency accounts.

Compensating For Rampant Volatility

Due to the excessive volatility within the Canadian dollar exchange rates, IIROC will apply a range of spot margin rates until further notice. The JPY/CAD pairing will have its risk margin push up to 3.70%. The Israeli Shekel versus CAD will be pushed up to 4.30%. The Mexican New Peso versus the CAD will be pushed up to 5.50%. Lastly, the Norwegian Krone versus the CAD will have its margin pushed up to 5.90%. Before the adjustment, all the aforementioned pairings had a 3.00% risk margin rate.

Due to the volatility experienced within the USD exchange rates, risk margin rate changes will apply to two new pairings until further notice. The first is the Norwegian Krone versus the USD, which will push up from 3.00% to 5.20%. The second pairing, the Mexican New Peso versus the USD, will be pushed all the way up to 8.90%, having almost doubled from the 4.90% it once was.

 Following Suit

This move comes shortly after the US National Futures Association had made similar changes to their margin trades as well. The security deposit requirements for FX transactions for Forex Dealer Members were officially changed on the 22nd of March, 2020. In its statement, the Association explained that the massive volatility in the currency markets, as well as a similar margin increase done by CME and ICE, the NFA will do the same.

The Executive Committee had announced that the minimum security deposits will be increased, and must be maintained by the regulated FDMs as per NFA Financial Requirements Section 12. These two currencies are the Norwegian Krone and the Mexican Peso. The minimum deposits will be 7% and 10%, respectively.

Incredible Impact Leads To Opportunities

It seems that the coronavirus has had a monumental impact in the world’s economy at large, starting first with the stock and crypto markets, then bleeding out into the oil markets, before finally reaching the currency markets. It’s been a wild ride, and it doesn’t seem to be stopping any time soon.

There is, however, money to be made for those with an eye to see it. No doubt, someone like Warren Buffet is having a blast, with all the stocks going as low as they are. With any luck, the entire situation will blow over by July.

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