IIROC Reduced Forex Margin Requirements: CAD and USD Pairs

According to the recent Notice, IIROC Reduced Forex Margin Requirements for CAD and USD pairs. Which pairs have been reduced in the margin requirements?

24 February, AtoZForex  The Investment Industry Regulatory Organization of Canada (IIROC) is a non-profit national self-regulatory organization. The regulatory body is in charge of supervising all investment dealers and trading activity on debt and equity marketplaces in Canada. IIROC sets and enforces high-quality regulatory and investment industry standards. Moreover, it has quasi-judicial powers in that it holds enforcement hearings. IIROC also has the power to suspend, fine, and expel registered representatives and members such as advisers. In addition, it protects investors and strengthens market integrity by maintaining efficient and competitive capital markets.

IIROC has recently published a Notice about an update in the Foreign Exchange (FX) spot risk margin. According to the Notice, there is a reduction in margin requirements on the USD and CAD pairs following a periodic change in volatility.

Additionally, Canadian brokers set their own minimum margin requirements called “house requirements”. Therefore, the lending terms may vary from client to client, but brokers must always function within the parameters of margin requirements set by the regulatory body.

IIROC Reduced Forex Margin Requirements: CAD & USD pairs

Based on the volatility of the exchange rates of the Canadian dollar, the following spot risk margin rates will apply effective February 28, 2017.

  • JPY versus CAD from 5.00% to 3.00%
  • USD versus CAD from 2.40% to 2.20%

Based on the volatility of the exchange rates of US dollar, the following spot risk margin rates will apply effective February 28, 2017.

  • CAD versus USD from 2.40% to 2.20%
  • JPY versus USD from 4.00% to 3.00%
  • NZD versus USD from 3.30% to 3.00%
  • NOK versus USD from 3.50% to 3.00%

Just last year in October, IIROC cut down the spot risk margin rates of some USD and CAD pairs. And now again they have further reduced the spot risk margin rates. The regulator updates this list when a spot margin rate of the currency increases or reduces. It is done because the volatility of the currency exceeds or no longer exceeds the volatility threshold that is set out in Dealer Member Rule.

What is an offside day?

Excess volatility in a currency is measured and tracked as an “offside day”. An offside day is triggered when the percentage change in the currency exchange rate over five-day intervals (through a period of 60 trading days) exceeds the margin rate for the currency group. During the period if the number of offside base days reaches 4, a margin surcharge applies.

The previous list provided in IIROC Rules Notice 17-0007 issued on January 9, 2017, is replaced by this list of foreign exchange spot risk margin rates.

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