Uncertain times call for bold moves. The economic panic caused by the COVID-19 caused extreme uncertainty in investment markets such as forex, futures and stocks during the last month.
Pandemic-related instability has driven currencies such as the euro or yen, stocks such as Boeing and Tesla, and metals such as silver and palladium into a roller coaster of highs and lows.
In that context, major platforms for trading have agreed to take action to reduce uncertainty and have adjusted the leverage and margin criteria for trading certain securities.
Dukascopy, Admiral Stocks, Oanda and IG have taken action this week. Prior to that, Forex.com and Saxo Bank, among others, had made their moves.
The Uncertainty in Coronavirus Times
Visualizing Volatility by Wealth Enhancement Group
Virus-related instability has been alarming over the last few weeks. Circuit breakers and caps have been caused many times in the stock markets, 3-ish-percent drops or weekly rallyes have occurred in Forex pairs such as EUR/USD, USD/JPY, and indices such as DXY.
In metals, for example, gold has increased weekly and decreased by about 8 percent, and palladium plummeted nearly 30 percent in the week of March 9 and soared 38 percent two weeks later.
Contextually, Jim Cahn, Wealth Enhancement Group’s chief investment officer and business development higlighted that anticipation of what is coming has pushed volatility to levels not seen since the great recession.
Admiral Markets Adjust Margin Conditions
London-based broker Admiral Markets lowered the highest potential leverage for pro customers on four CFD instruments related to oil, including WTI Spot, WTI Futures, Brent Spot and Brent Futures.
In such positions, the compensation will be 1:50 for notional position values of up to EUR 500,000 or equivalent. In positions with a valuation of more than EUR 500,000 or similar, the interest would be 1:10.
Dukascopy COVID-19 Leverage Reduction
Swiss trading site Dukascopy lowered leverage for commodities, indexes and precious metals to 1:30. No changes to any other investment assets.
IG’s Margin Shifts
UK-based trading company IG heightened the minimum margin level on new positions over the weekend. Nonetheless, there will be no effect on stores or markets where minimums are already higher, so no adjustments will be made to current positions.
- Indices at 5 percent at 16:00 GMT
- FX/Gold to 3% at 16:00 GMT
- Oil (energy) at 15 percent at 16:00 GMT
According to the broker, the margin rates returned to the minimum rates of 1% Indices/FX and 5% Oil on Sunday. As the changes will depend on market conditions, they can be applied to next weekend.
Oanda Japan Changes Margins in 3 Currency Pairs
On 13 April, Oanda Japan will adjust the margin rates for some pairs, such as AUD/SGD, AUD/CAD and CAD/JPY, from standard 2% to the new 3%.
Previously, Oanda changed margins for AUD/CHF, AUD/JPY, AUD/USD, EUR/AUD, EUR/NOK, NZD/CHF, NZD/JPY, NZD/USD, and USD/NOK on 30 March.
Past margin and leverage actions from other platforms for trading.
Prior to that, on March 22, Forex.com changed the successful margins to all MXN crosses to 10% and all NOK pairs to 7%. Margins in 19 other currencies, including AUD/CHF, CAD/JPY, GBP/JPY and NZD/JPY, were also modified on 23 March, ranging from 2% to 3%.
The Saxo Bank Japanese affiliate adjusted the margins for certain stocks and single-stock CFDs at midnight on 14 March.