City Index anticipates silver trading frenzy with 15% margin rates

Rick Steves

Reddit traders are leading a democratic movement of empowerment in trading. A number of institutions have already taken hits to their balance sheets and to their names. Anticipation has become the name of the game for many retail brokers. A change in margin requirements will do in the short term, but business models will inevitably be reviewed as Reddit traders are likely here to stay.

Silver

City Index has updated its margin requirements on Silver due to recent volatility in the markets caused by the r/WallStreetBets mania. The new required margin starts at 15% from today for non-MetaTrader clients. For MT users, the new margin rates go into effect before markets open on Sunday.

The UK FCA authorized retail FX and CFD broker also warned traders to ensure their accounts are adequately funded to maintain their open positions as there remains a risk of gapping at the market open. The firm’s own analysis states that “it seems unlikely that a small group of investors could drastically move the market”.

“Unlike equities that generally require substantial margin of 50% up to 100%, silver can be extremely leveraged in many trading markets requiring as little as 5% on deposit. This means the effects of a short squeeze can be even more dramatic than in a stock like GME”, the City Index analyst wrote, adding that “the same algorithmic trading strategies that propelled GME could be even more effective in silver, due to a more decentralized market with much different regulatory obligations.”

Given the dramatic outages and trading restrictions that took place last week as retail brokers found themselves and their business models unsuited for the subreddit phenomenon, trading firms are starting to anticipate the potential adverse effects of the silver trading frenzy. This could prevent established brokers from destroying their good name in a matter of days as happened with Robinhood and IG Group, among other big names.

City Index has also updated the list of restricted markets under the United States Executive Order 13959. These Chinese equities are now placed on “close only” trading for clients:
China Telecom Corp (HKD) CFD
China Communications Construct CFD
China Railway Construction CFD
China Mobile (HKD) CFD
CRRC Corp Ltd CFD
SMIC (Semiconductor Mfg Intl) CFD
China Unicom (HKD) CFD
China Mobile (USD) CFD

FinanceFeeds continues to monitor the current situation as times are certainly changing.

 

Read this next

Digital Assets

Binance upgrades Bahrain license to offer full-suite of crypto services

The Central Bank of Bahrain (CBB) has granted Binance its Category 4 license as a fully-fledged crypto-asset service provider (CASP).

Digital Assets

BitMEX spot exchange hits $24 million in daily volume

The newly-launched spot market of crypto exchange BitMEX reported a record of $24 million in 24-hour trade activity on May 25.

Retail FX

Financial Commission certifies offering of trade copier 4X Solutions

The Financial Commission, an independent self-regulatory compliance specialist for the financial services industry, has certified the trading technology offered by trade copier 4X Solutions.

Industry News, Inside View

LIVE from Devexperts webinar for brokers on Fractional Trading

Finance Feeds is providing live coverage of the event that aims to help brokers discover fractional shares as a key tool for a successful brokerage business in today’s trading industry.

Industry News, Retail FX

ASIC celebrates retail ban on binary options as 68% of wholesale clients lose money

In the 13 months before the ban, between 74% and 77% of active retail clients lost money trading binary options. The product intervention order does not apply to wholesale clients.

Crypto Insider

Investing in crypto: how to stay away from weak players

The main reason behind the hacks of crypto exchanges is weak key management. For example, all 4 hacks that took place in 2021 were caused by the ability of hackers to obtain access to hot wallets. 

Retail FX

Vantage launches swap-free gold XAUUSD trades for all clients until end of July

“As the greenback continues to strengthen, we want to support traders who remain bullish on gold or seek short term trading opportunities amid the volatility”

Industry News

Broadridge launches ESG reporting solution ahead of European regulation SFDR

The Broadridge managed solution for EET adds to existing Broadridge services, including European PRIIPs Template, European MiFID Template, Solvency II Tripartite Template and many more across the European jurisdictions.

Industry News

iCapital to acquire embedded structured investment platform SIMON

SIMON’s platform, SPECTRUM, is a multi-dimensional allocation analysis and portfolio construction tool designed to evaluate how structured investments and/or annuities may fit into a portfolio. 

<