NFA changes minimum security deposit requirement for transactions in Turkish lira, South African rand

The United States National Futures Association (NFA) has today published a notice on its website informing of pending changes to required minimum security deposits for certain forex transactions.

The Association explains that in light of the recent volatility in the currency markets, and the margin increases that CME and ICE have implemented with respect to foreign currency futures involving the Turkish lira and South African rand, the Executive Committee has determined to increase the minimum security deposits required to be collected and maintained by FDMs (Forex dealer members) under NFA Financial Requirements Section 12 to the following:

• Turkish lira – 12%;
• South African rand – 7%;

These increases are set to become effective, for both new and existing positions, at 5:00 p.m. CT on September 24, 2018 and are poised to remain in effect until further notice.

Let’s note that NFA Financial Requirements Section 12 mandates that each Forex Dealer Member (FDM) has to collect and maintain certain minimum security deposit for each forex transaction between the FDM and its customers and/or eligible contract participant counterparties.

The minimum security deposit is 2% of the notional value of transactions in the British pound, the Swiss franc, the Canadian dollar, the Japanese yen, the Euro, the Australian dollar, the New Zealand dollar, the Swedish krona, the Norwegian krone, and the Danish krone.

Its level is 5% of the notional value of other transactions; for short options, the above amount plus the premium received; and for long options, the entire premium.

An FDM is required to collect additional security deposits from a retail forex customer, or liquidate the retail forex customer’s positions, if the amount of the retail forex customer’s security deposits maintained with the FDM is not sufficient to meet the requirements of this section.

Under this rule, an FDM has to immediately notify NFA’s Compliance Department if the FDM changes the security deposit amount provided, however, that any decrease cannot fall below the highest minimum security deposit amount required as applicable to a particular currency.