NFA raises required minimum security deposits for certain FX transactions

Maria Nikolova

The Association has determined to increase the minimum security deposits required to be collected and maintained by FDMs for the Norwegian Krone and the Mexican Peso.

The United States National Futures Association (NFA) is changing the requirements for the security deposits for FX transactions with Forex Dealer Members (FDMs).

Let’s note that each Forex Dealer Member has to collect and maintain certain minimum security deposit for each forex transaction between the Forex Dealer Member and its customers and/or eligible contract participant counterparties. At present (before the changes), the required deposits are:

  • (i) 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;
  • (ii) 5% of the notional value of other transactions;
  • (iii) for short options, the above amount plus the premium received; and
  • (iv) for long options, the entire premium.

The Executive Committee may temporarily increase these requirements under extraordinary market conditions.

Today, the Association said 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 Norwegian Krone and Mexican Peso, the Executive Committee has determined to increase the minimum security deposits required to be collected and maintained by FDMs under NFA Financial Requirements Section 12 to the following:

  • Norwegian Krone – 7%;
  • Mexican Peso – 10%.

These increases become effective, for both new and existing positions, at 5:00 p.m. CT on March 22, 2020. The changed requirements remain in effect until further notice.

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