Before You Trade
This is a quick guide to help you navigate the margin requirements in your MF Global FX Trading Account.
Now that you have opened your MF Global FX Trading Account, please make sure you review the Margin Rates and Margin Policy & Procedures before you place your first trade.
If you held an account with a non-IIROC dealer member, you probably traded at 0.5% or 1% margin. That would have been a leverage factor of 200:1 or 100:1.
Your MF Global FX Trading Account does not have a single margin rate or uniform leverage factor. It is because we are registered in Canada and regulated as an IIROC dealer member, where your account is eligible for CIPF protection against dealer insolvency.
Before you place your first trade, you should understand that margin requirements can vary among different currency pairs. Click below to review:
If your account application has been approved and you are deciding on how much to fund the account with, click here to learn more about the minimum deposit to open a new account.
Frequently Asked Question: How much can I trade in my account?
Our response would invariably be: You need to understand the margin requirements of the currency pairs you want to trade, and also decide on how aggressive or conservative you want to be as a trader.
Generally, it would be prudent to keep at least 50% of your account equity as free margin, to minimize the risk of a Maintenance Margin Warning or a Liquidation Margin Call from the slightest random market volatility.
At MF Global FX most major currencies traded against the U.S. Dollar are margined between 3% to 4.3%.
For example, EUR/USD, USD/JPY, USD/CHF and USD/CAD are margined at 3%.
GBP/USD is margined at 3.4%. NZD/USD is margined at 3.6%, and AUD/USD is margined at 4.3%.
You should note that margin rates could change at any time without notice, and it is your responsibility to ensure that there is sufficient margin in your account at all times.
Let us go through an example:
You have opened an MF Global FX Mini Account with US$10,000. You want to trade 2 mini lots in USD/JPY and 3 mini lots in EUR/USD.
According to IIROC, USD/JPY is margined at 3% or US$300 per mini lot. While EUR/USD is also margined at 3%, the U.S. Dollar requirement is US$430.23.
You’re probably wondering: Why is the U.S. Dollar margin requirement for USD/JPY less than the U.S. Dollar margin requirement for EUR/USD? Aren’t they both margined at 3%?
Yes, they are both margined at 3%. But the difference is due to the lot sizes.
Lot sizes? You ask. Aren’t they both mini lots of 10,000 units each?
Well, yes they are but you see, you have to consider the U.S. Dollar equivalent lot sizes before you apply the margin rates to calculate the actual margin requirements.
For USD/JPY, since the lot size in U.S. Dollar is constant at USD10,000, a 3% margin rate would always equal a margin requirement of US$300.
For EUR/USD, however, the EUR10,000 lot size in U.S. Dollar fluctuates with the exchange rate. Currently, for margining purposes, MF Global FX has set the conversion rate in EUR/USD to 1.434095, so a 3% margin rate works out to a margin requirement of (EUR10,000 X 1.434095 X 3%=) US$430.23.
So, the total margin requirement for these 2 positions equal (US$300 X 2 + US$430.23 X 3 =) US$1,890.69.
OK. We have shown that you need an Initial Margin Requirement of US$1,890.69 to open these 2 positions. This amount also happens to be your Maintenance Margin Requirement, which means you must have US$1,890.69 in equity to maintain these 2 positions.
Since you have US$10,000 of equity, you are well covered…right?
Well, it depends on how the markets perform. If the markets move against you, and you begin to pile up losses, then you may at some point need to start worrying.
When should you start to worry?
Let us crunch some numbers.
You have US$10,000 of equity. The Maintenance Margin Requirement for the 2 positions is US$1,890.69. Subtracting US$1,890.69 from US$10,000 leaves you with US$8,109.31 of free margin, or Usable Maintenance Margin.
If markets begin to move against your positions, and unrealized losses exceed US$8,109.31 (all of your free margin), you will receive a Maintenance Margin Warning. This means you no longer have sufficient equity in the account to maintain your open positions.
At this point, you can no longer open new trades (your account is locked). However, you can close existing trades, reduce them and/or send additional funds. Or you could take a chance, do nothing and hope that the market would come back in your favour.
If your equity is still below Maintenance Margin Requirement for all open positions 72 hours after we send you the Maintenance Margin Warning, then we have no choice but to liquidate some or all of your positions.
On the other hand, if your account is determined to have sufficient margin during our system scan at the end of the day (usually around 5 PM EST), it will be unlocked and you can resume trading.
If you wish to resume trading immediately at any time provided you have restored sufficient margin to your account, give us a call and ask for a Margin Reset. U.S. & Canada clients can call toll-free at 1.866.272.2714 (Sunday 5:15PM to Friday 4:00PM EST) or 1.888.387.5454 (Monday to Friday 8:00AM to 6:00PM EST). International clients can call 1.212.609.5967.
At any time when your equity is below Liquidation Margin Requirement, which is 10% of Maintenance Margin Requirement, then all your positions would be subject to a Liquidation Margin Call, without warning.
In the example, Liquidation Margin Call will occur when your equity has gone below (US$1,890.69 X 10% =) US$189.07 or your unrealized losses on the positions have exceeded (US$10,000 – (US$1,890.69 X 10%) =) US$9,810.93.
This is designed to prevent you from losing more than the funds that you have on deposit in your MF Global FX Trading Account.
Perform due diligence and become an informed trader
What you have read on this page is a summary of important facts about trading FX on margin. Review all the information on our website carefully, especially the margin requirements, margin policy and the risk disclosure statements found on the Risk Warning page.
Contact us with any questions or concerns that you may have before you begin trading.
