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Margins
Forex is traded on margin, which means a portion of the account deposit is posted as a performance bond with the dealer when the trader enters a position. Margin can be a nominal dollar value or expressed as a percentage of the notional contract value. For example, some dealers require a US$2,000 margin deposit for every standard lot (100K) position, regardless of currency pair. Other dealers require a margin deposit calculated by applying the applicable margin percentage to the notional value of the contract.
Margin and Leverage are flip sides of the same coin. Reciprocating a margin rate of 4% (or 1/0.04) produces a leverage factor of 25:1. In practical terms, the 4% margin rate in this example allows every dollar of margin deposit to control a maximum of 25 times or 25 dollars worth of a currency position. Margin gives the trader additional purchasing power that amplifies the potential profit or loss to exposure by the leverage factor.
As a function of currency volatility and liquidity risk, margin rates may be mandated by regulation in some jurisdictions and they communicate the level of perceived market risk to both the dealer and the trader. Margin rates tend to rise as the perceived risks increase, and they tend to fall as those risks abate. In many jurisdictions, a dealer sets the trader’s account to a uniform margin rate. Once account equity falls below the amount of margin deposit required to maintain open positions, all positions are liquidated to mitigate risk to the dealer and trader.
MF Global FX Margin Regulation
MF Global Canada Co. is a member of the Investment Industry Regulatory Organization of Canada (IIROC). Eligible client accounts held by IIROC members are insured against dealer insolvency, within specified limits, by the Canadian Investor Protection Fund (CIPF).
As a regulated member of the industry, MF Global FX margins the unhedged foreign exchange positions of its clients according to IIROC Regulation 100.2 (d)(iv).1 In reference to Dealer Member Rule 100.2(d)(v)(B) and (C), there is in place a monitoring mechanism whereby the volatility of all foreign currencies in Groups 1, 2 and 32 are monitored by IIROC on a daily basis.
At MF Global FX, margin rates are derived from rates published by IIROC in the Margin Violation Summary Report. The margin rates applicable to all currency pairs traded on the MF Global FX Trading Station II platform are displayed here.
MF Global FX and its clients follow its Margin Policy & Procedures to ensure compliance with IIROC foreign exchange margin regulation. Every client account is governed by 3 margin levels:
- 1. Initial Margin set by IIROC,
- 2. Maintenance Margin which is equal to Initial Margin, and
- 3. Liquidation Margin set by MF Global FX.
Initial / Maintenance Margin is the amount of margin deposit required in the client account to open and maintain a currency position. Liquidation Margin is set to 10% of Initial/Maintenance Margin. Margins are subject to IIROC regulation and may change at anytime without notice. It is the trader’s responsibility to ensure there is sufficient margin in the account at all times.
When account equity falls below Maintenance Margin, no new positions are allowed and the account enters into “liquidation only” mode. At this time a “pop-up” message will appear in the [Messages] window and a “W” will appear on the [MC] column in the [Accounts] window of the trading platform to issue a Maintenance Margin Warning.
Shortly after 5 PM EST, MF Global FX will confirm the margin status of the account. If account equity is still below Maintenance Margin, the Maintenance Margin Warning will be sent via email and/or phone call. The client has 72 hours, from this notification, to deposit funds, reduce or close existing positions to bring the account back above Maintenance Margin level. The “W” setting in the [MC] column is reset to “N” after 5 PM EST to allow normal trading when account equity exceeds Maintenance Margin.3
If, at the end of the 72 hour period, the market has not recovered in favour of the client and no action has been taken to restore account equity to satisfy Maintenance Margin, some or all open positions could be closed at prevailing market rates.
If at any time (including the 72 hour period allowed to restore account equity to Maintenance Margin) account equity should fall below Liquidation Margin, a Liquidation Margin Call will trigger and all open positions will be immediately liquidated, without warning, at prevailing market rates.
A “Y” appears on the [MC] column in the [Accounts] window of the trading platform whenever positions are liquidated due to insufficient margin.
The MF Global FX Trading Station II platform is designed to automatically liquidate all open positions if your account equity falls below Liquidation Margin Requirement so that you cannot lose more than the funds you have on deposit in your account. Please carefully review the Margin Policy and Procedures, the Risk Information Document for Derivatives and the terms and conditions in the Client Agreement accessible from this website.
Important Margin Information
Your MF Global FX Account displays important margin information in the [Accounts] window on the MF Global FX Trading Station II platform:
[Usd Maint Mr] is Used Maintenance Margin. This is the margin deposit required to maintain existing positions.
[Usbl Maint Mr] is Usable Maintenance Margin. This is the margin deposit available for opening new positions. A Maintenance Margin Warning is triggered when this reaches zero.
[Usbl Maint Mr, %] is [Usbl Maint Mr] / [Equity] X 100%.
[Usd Mr] is Used Margin. This represents 10% of Used Maintenance Margin.
[Usbl Mr] is Usable Margin. All positions are automatically liquidated when this reaches zero.
[Usbl Mr, %] is [Usbl Mr] / [Equity] X 100%.
[MMR] or Maintenance Margin Requirement is displayed in the [Simple Dealing Rates] window. This is the amount of Maintenance Margin deposit required for one lot of the applicable currency pair. If account equity falls below aggregate MMR, no new positions4 are allowed and the account enters into “liquidation only” mode. Please review the MF Global FX Margin Policy & Procedures.
1 Margin requirements are subject to IIROC regulation and may change at anytime without notice. MF Global FX may set higher margin requirements based on account size, simultaneous open positions, trading style, and market conditions, etc.
2 A quick look at currencies traded on MF Global FX Trading Station II: Group 1 consists of the U.S. Dollar. Group 2 consists of the Euro, British Pound, Swiss Franc, Japanese Yen, Australian Dollar, and New Zealand Dollar. Group 3 consists of the Hong Kong Dollar and Singapore Dollar. Group 4 consists of the Turkish Lira and South African Rand.
3 The “W” setting in the [MC] column may be reset to “N” on request when account equity exceeds Maintenance Margin Requirement.
4 Once account equity falls below Maintenance Margin Requirement and the [MC] status is at “W”, existing open positions in the account cannot be hedged until the [MC] status is reset to “N”.
Platform Margin Info (U.S. Dollar Accounts)
| Currency Pair |
Initial/Maintenance Margin % |
Liquidation Margin % |
| EUR/USD | 4.00 | 0.40 |
| USD/JPY | 3.00 | 0.30 |
| GBP/USD | 3.00 | 0.30 |
| USD/CHF | 3.00 | 0.30 |
| EUR/CHF | 7.00 | 0.70 |
| AUD/USD | 4.70 | 0.47 |
| USD/CAD | 3.30 | 0.33 |
| NZD/USD | 3.60 | 0.36 |
| EUR/GBP | 7.00 | 0.70 |
| EUR/JPY | 7.00 | 0.70 |
| GBP/JPY | 6.00 | 0.60 |
| CHF/JPY | 6.00 | 0.60 |
| GBP/CHF | 6.00 | 0.60 |
| EUR/AUD | 8.70 | 0.87 |
| EUR/CAD | 7.30 | 0.73 |
| AUD/CAD | 8.00 | 0.80 |
| AUD/JPY | 7.70 | 0.77 |
| CAD/JPY | 6.30 | 0.63 |
| NZD/JPY | 6.60 | 0.66 |
| GBP/CAD | 3.80 | 0.38 |
| GBP/NZD | 6.60 | 0.66 |
| GBP/AUD | 7.70 | 0.77 |
| AUD/NZD | 8.30 | 0.83 |
| USD/SEK | 4.20 | 0.42 |
| USD/DKK | 10.00 | 1.00 |
| EUR/SEK | 8.20 | 0.82 |
| EUR/NOK | 8.20 | 0.82 |
| USD/NOK | 4.20 | 0.42 |
| USD/MXN | 4.00 | 0.40 |
| AUD/CHF | 7.70 | 0.77 |
| EUR/NZD | 7.60 | 0.76 |
| USD/ZAR | 25.00 | 2.50 |
| USD/SGD | 10.00 | 1.00 |
| USD/HKD | 10.00 | 1.00 |
| GBP/SEK | 7.20 | 0.72 |
| NOK/JPY | 7.20 | 0.72 |
| SEK/JPY | 7.20 | 0.72 |
| SGD/JPY | 13.00 | 1.30 |
| HKD/JPY | 13.00 | 1.30 |
| ZAR/JPY | 28.00 | 2.80 |
| USD/TRY | 25.00 | 2.50 |
| EUR/TRY | 29.00 | 2.90 |
| NZD/CHF | 6.60 | 0.66 |
| CAD/CHF | 6.30 | 0.63 |
| NZD/CAD | 6.90 | 0.69 |
| CHF/SEK | 7.20 | 0.72 |
| CHF/NOK | 7.20 | 0.72 |
| EUR/CZK | 14.00 | 1.40 |
| USD/CZK | 10.00 | 1.00 |
| EUR/DKK | 14.00 | 1.40 |
Margins are subject to IIROC regulation and may change at anytime without notice. It is the trader’s responsibility to ensure there is sufficient margin in the account at all times. Please review the MF Global FX Margin Policy & Procedures.
Margin Policy & Procedures
Trading foreign exchange (forex) on margin carries a high degree of risk, especially in fast moving markets. In accordance with MF Global FX Margin Policy, procedures have been implemented to protect you as well as to comply with relevant IIROC regulations. Please take a few minutes to read through the Margin Policy and Margin Call Procedures, and don't hesitate to contact us if you have any questions.
Margin Policy
Trading forex on margin with MF Global FX requires that each trading account have a sufficient cash balance (equity) to cover open positions at all times. Please click here to view margin rates for currency pairs traded at MF Global FX, and also here to view the Initial, Maintenance and Liquidation Margin Requirements for U.S. Dollar Mini Accounts.
The Initial Margin Requirement is the amount in U.S. Dollar or Canadian Dollar required to open a new position. This is calculated by applying the Initial Margin Rate, which varies according to the currency pair, to the gross principal value of the contract.1
The Maintenance Margin Requirement is the amount in U.S. Dollar or Canadian Dollar required to maintain an open position and is equal to the Initial Margin Requirement.
The Liquidation Margin Requirement is the amount in U.S. Dollar or Canadian Dollar at or below which all open positions in the account will be automatically liquidated. This amount is equal to 10% of the Maintenance Margin Requirement.
MF Global Canada Co. is a member of the Investment Industry Regulatory Organization of Canada (IIROC). Eligible client accounts held by IIROC members are insured against dealer insolvency, within specified limits, by the Canadian Investor Protection Fund (CIPF). As a regulated member of the industry, MF Global FX margins the unhedged foreign exchange positions of its clients according to IIROC Regulation 100.2 (d)(iv).
Margin rates are subject to IIROC regulation and may change at anytime without notice. It is the trader’s responsibility to ensure there is sufficient margin in the account at all times.
Margin Call Procedures
There are 3 settings in the [MC] (for Margin Call) column in the [Accounts] window on the trading platform:
- “N” means there is sufficient Maintenance Margin
- “W” means a Maintenance Margin Warning has been issued
- “Y” means liquidation of positions due to insufficient margin
If account equity fails to meet Maintenance Margin Requirement, MF Global FX will issue a Maintenance Margin Warning. A “pop-up” message will appear in the [Messages] window and a “W” will appear on the [MC] column in the [Accounts] window of the trading platform.
- 1. No new open positions2 will be allowed on the account until the Maintenance Margin Warning or “W” has been reset to “N” by MF Global FX.
- 2. If the Maintenance Margin Warning persists after 5 PM EST, MF Global FX will issue a Maintenance Margin Warning e-mail to the account holder with details and a deadline for posting the required additional margin, which is to be determined at the discretion of MF Global FX .
- 3. The Maintenance Margin Warning status will be reset by MF Global FX after 5 PM EST if the account equity meets or exceeds the Maintenance Margin Requirement.3
Some or all open positions will be liquidated if one of the following events occurs:
- 1. Where account equity falls to or below Liquidation Margin Requirement for all open positions, a Liquidation Margin Call will trigger and all open positions will be liquidated immediately, regardless of any previous Maintenance Margin Warning issued by e-mail, phone, or system messages. At such time, no notices or additional warnings will be provided by MF Global FX.
- 2. Where an account has not been sufficiently funded within the deadline set in a Maintenance Margin Warning e-mail; some or all open positions will be closed. At this time, no notices or additional warnings will be provided by MF Global FX.
A “Y” appears on the [MC] column in the [Accounts] window of the trading platform whenever positions are liquidated due to insufficient margin.
The MF Global FX Trading Station II platform is designed to automatically liquidate all open positions if your account equity falls below Liquidation Margin Requirement so that you cannot lose more than the funds you have on deposit in your account. Please carefully review the Risk Information Document for Derivatives, and the terms and conditions in the Client Agreement accessible from this website.
MF Global FX will not be responsible for losses, lost profits, and other direct or indirect damages resulting from the closing of open positions due to insufficient margin. Any failure by MF Global FX to enforce its rights to liquidate shall not be deemed a waiver by MF Global FX of those rights.
1 Margin Rate is a true percentage applied to the gross principal value of the contract. Please consult Margin Requirements for U.S. Dollar Mini Accounts for illustrations.
2 Once account equity falls below Maintenance Margin Requirement and the [MC] status is at “W”, existing open positions in the account cannot be hedged until the [MC] status is reset to “N”.
3 The “W” setting in the [MC] column may be reset to “N” on request when account equity exceeds Maintenance Margin Requirement.
Margin Calls
The idea of margin FX trading is that your margin deposit acts as a good faith deposit or a performance bond to secure the larger notional value of your position. Margin FX trading allows traders to hold a position much larger than the actual account value. The MF Global FX Trading Station II platform has margin management capabilities, which allow for leverage up to levels permitted by regulation.
Trading forex on margin carries a high degree of risk, since high leverage may work against you as well as for you. If account equity falls below Maintenance Margin Requirement, a Maintenance Margin Warning will be issued with 72 hours given to bring the account back above margin requirement. If account equity falls below Liquidation Margin Requirement at any time, a Liquidation Margin Call will trigger to liquidate all open positions. Please review the MF Global FX Margin Policy & Procedures.
Please keep in mind that when the account's Usable Maintenance Margin or [Usbl Maint Mr] as displayed in the [Accounts] window of the trading platform reaches zero, no additional positions may be opened and account is in “liquidation only” mode. At this time a “pop-up” message will appear in the [Messages] window and a “W” will appear in the [MC] column in the [Accounts] window.
Traders have 72 hours to restore Maintenance Margin to a sufficient level to resume normal trading. If after 72 hours the account is still margin-deficient as determined by regulation, some or all open positions may be closed at the discretion of MF Global FX.
If account equity falls below Liquidation Margin at any time, a Liquidation Margin Call will trigger to liquidate all open positions.
A “Y” appears on the [MC] column in the [Accounts] window of the trading platform whenever positions are liquidated due to insufficient margin.
Margin requirements are subject to IIROC regulation and may change at anytime without notice. MF Global FX may set higher margin requirements based on account size, simultaneous open positions, trading style, market conditions, etc. It is the trader’s responsibility to ensure there is sufficient margin in the account at all times. All quotes and trades are subject to the terms and conditions of the Client Agreement accessible from this website.
Margin Reset
Maintenance Margin is the amount of margin deposit required in the MF Global FX Trading Account to maintain open currency positions.
When account equity falls below Maintenance Margin, no new positions are allowed and the account enters into “liquidation only¨ mode. At this time a “pop-up¨ message will appear in the [Messages] window and a “W¨ will appear on the [MC] column in the [Accounts] window of the trading platform to issue a Maintenance Margin Warning.
Shortly after 5 PM EST, MF Global FX will confirm the margin status of the account. If account equity is still below Maintenance Margin, the Maintenance Margin Warning will be sent via email and/or phone call. The trader has 72 hours, from this notification, to deposit funds, reduce or close existing positions to bring the account back above Maintenance Margin level. If, at the end of the 72 hour period, the market has not recovered in favour of the trader and no action has been taken to restore account equity to satisfy Maintenance Margin, some or all open positions could be closed at prevailing market rates.
When account equity is restored to a level that exceeds Maintenance Margin Requirement, the “W¨ setting in the [MC] column is automatically reset to “N¨ after 5 PM EST to allow normal trading. To resume trading with minimal delay when sufficient margin has been restored in the account, the trader may also call 1.866.272.2714 (U.S. & Canada toll-free) or email sales@mfglobalfx.ca to request an immediate “Margin Reset”.
MF Global FX will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from any delay in the Maintenance Margin Reset of a trading account.
Margin Requirements for U.S. Dollar Accounts
The following table displays the Initial, Maintenance and Liquidation Margin Rates of currency pairs traded at MF Global FX.
Also displayed are the Initial/Maintenance Margin Requirement and Liquidation Margin Requirement for currency pairs traded in a U.S. Dollar 100K, 10K & 1K Account.
| Initial / Maintenance Margin Req. | Liquidation Margin Req. | |||||||
| Currency Pair |
Margin Rate |
[MMR] US$ | Margin Rate |
[LMR] US$ | ||||
| 100K | 10K | 1K | 100K | 10K | 1K | |||
| EUR/USD | 4.00% | 4927.26 | 492.73 | 49.27 | 0.40% | 492.73 | 49.27 | 4.93 |
| USD/JPY | 3.00% | 3000.00 | 300.00 | 30.00 | 0.30% | 300.00 | 30.00 | 3.00 |
| GBP/USD | 3.00% | 4443.44 | 444.34 | 44.43 | 0.34% | 444.34 | 44.43 | 4.44 |
| USD/CHF | 3.00% | 3000.00 | 300.00 | 30.00 | 0.30% | 300.00 | 30.00 | 3.00 |
| EUR/CHF | 7.00% | 8622.71 | 862.27 | 86.23 | 0.70% | 862.27 | 86.23 | 8.62 |
| AUD/USD | 4.70% | 4056.34 | 405.63 | 40.56 | 0.47% | 405.63 | 40.56 | 4.06 |
| USD/CAD | 3.30% | 3300.00 | 330.00 | 33.00 | 0.33% | 330.00 | 33.00 | 3.30 |
| NZD/USD | 3.60% | 2507.98 | 250.80 | 25.08 | 0.36% | 250.80 | 25.08 | 2.51 |
| EUR/GBP | 7.00% | 8622.71 | 862.27 | 86.23 | 0.70% | 862.27 | 86.23 | 8.62 |
| EUR/JPY | 7.00% | 8622.71 | 862.27 | 86.23 | 0.70% | 862.27 | 86.23 | 8.62 |
| GBP/JPY | 6.00% | 8886.87 | 888.69 | 88.87 | 0.64% | 888.69 | 88.87 | 8.89 |
| CHF/JPY | 6.00% | 5322.50 | 532.25 | 53.23 | 0.60% | 532.25 | 53.23 | 5.32 |
| GBP/CHF | 6.00% | 8886.87 | 888.69 | 88.87 | 0.64% | 888.69 | 88.87 | 8.89 |
| EUR/AUD | 8.70% | 10716.79 | 1071.68 | 107.17 | 0.87% | 1071.68 | 107.17 | 10.72 |
| EUR/CAD | 7.30% | 8992.25 | 899.23 | 89.92 | 0.73% | 899.23 | 89.92 | 8.99 |
| AUD/CAD | 8.00% | 6904.40 | 690.44 | 69.04 | 0.80% | 690.44 | 69.04 | 6.90 |
| AUD/JPY | 7.70% | 6645.49 | 664.55 | 66.45 | 0.77% | 664.55 | 66.45 | 6.65 |
| CAD/JPY | 6.30% | 6133.69 | 613.37 | 61.34 | 0.63% | 613.37 | 61.34 | 6.13 |
| NZD/JPY | 6.60% | 4597.96 | 459.80 | 45.98 | 0.66% | 459.80 | 45.98 | 4.60 |
| GBP/CAD | 6.30% | 9331.21 | 933.12 | 93.31 | 0.63% | 933.12 | 93.31 | 9.33 |
| GBP/NZD | 6.60% | 9775.56 | 977.56 | 97.76 | 0.70% | 977.56 | 97.76 | 9.78 |
| GBP/AUD | 7.70% | 11404.82 | 1140.48 | 114.05 | 0.77% | 1140.48 | 114.05 | 11.40 |
| AUD/NZD | 8.30% | 6731.79 | 673.18 | 67.32 | 0.83% | 673.18 | 67.32 | 6.73 |
| AUD/CHF | 7.70% | 6645.49 | 664.55 | 66.45 | 0.77% | 664.55 | 66.45 | 6.65 |
| EUR/NZD | 7.60% | 9361.79 | 936.18 | 93.62 | 0.76% | 936.18 | 93.62 | 9.36 |
| USD/ZAR | 25.00% | 25000.00 | 2500.00 | 250.00 | 2.50% | 2500.00 | 250.00 | 25.00 |
| USD/SGD | 10.00% | 10000.00 | 1000.00 | 100.00 | 1.30% | 1000.00 | 100.00 | 10.00 |
| USD/HKD | 10.00% | 10000.00 | 1000.00 | 100.00 | 1.30% | 1000.00 | 100.00 | 10.00 |
| USD/TRY | 25.00% | 25000.00 | 2500.00 | 250.00 | 2.50% | 2500.00 | 250.00 | 25.00 |
| EUR/TRY | 29.00% | 35722.64 | 3572.26 | 357.23 | 2.90% | 3572.26 | 357.23 | 35.72 |
| USD/SEK | 4.20% | 4200.00 | 420.00 | 42.00 | 0.42% | 420.00 | 42.00 | 4.20 |
| USD/DKK | 10.00% | 10000.00 | 1000.00 | 100.00 | 1.30% | 1000.00 | 100.00 | 10.00 |
| EUR/SEK | 8.20% | 10100.88 | 1010.09 | 101.01 | 0.82% | 1010.09 | 101.01 | 10.10 |
| EUR/NOK | 8.20% | 10100.88 | 1010.09 | 101.01 | 0.82% | 1010.09 | 101.01 | 10.10 |
| USD/NOK | 4.20% | 4200.00 | 420.00 | 42.00 | 0.42% | 420.00 | 42.00 | 4.20 |
| USD/MXN | 4.00% | 4000.00 | 400.00 | 40.00 | 0.40% | 400.00 | 40.00 | 4.00 |
| GBP/SEK | 7.20% | 10664.24 | 1066.42 | 106.64 | 0.72% | 1066.42 | 106.64 | 10.66 |
| NOK/JPY | 7.20% | 1124.72 | 112.47 | 11.25 | 0.72% | 112.47 | 11.25 | 1.12 |
| SEK/JPY | 7.20% | 924.49 | 92.45 | 9.24 | 0.72% | 92.45 | 9.24 | 0.92 |
| SGD/JPY | 13.00% | 9327.86 | 932.79 | 93.28 | 1.30% | 932.79 | 93.28 | 9.33 |
| HKD/JPY | 13.00% | 1668.40 | 166.84 | 16.68 | 1.30% | 166.84 | 16.68 | 1.67 |
| ZAR/JPY | 28.00% | 3692.06 | 369.21 | 36.92 | 2.80% | 369.21 | 36.92 | 3.69 |
| NZD/CHF | 6.60% | 4597.96 | 459.80 | 45.98 | 0.66% | 459.80 | 45.98 | 4.60 |
| CAD/CHF | 6.30% | 6133.69 | 613.37 | 61.34 | 0.63% | 613.37 | 61.34 | 6.13 |
| NZD/CAD | 6.90% | 4806.95 | 480.70 | 48.07 | 0.69% | 480.70 | 48.07 | 4.81 |
| CHF/SEK | 7.20% | 6386.99 | 638.70 | 63.87 | 0.72% | 638.70 | 63.87 | 6.39 |
| CHF/NOK | 7.20% | 6386.99 | 638.70 | 63.87 | 0.72% | 638.70 | 63.87 | 6.39 |
| EUR/CZK | 14.00% | 17245.41 | 1724.54 | 172.45 | 1.40% | 1724.54 | 172.45 | 17.25 |
| USD/CZK | 10.00% | 10000.00 | 1000.00 | 100.00 | 1.00% | 1000.00 | 100.00 | 10.00 |
| EUR/DKK | 14.00% | 17245.41 | 1724.54 | 172.45 | 1.40% | 1724.54 | 172.45 | 17.25 |
| USD/RUB | 25.00% | 25000.00 | 2500.00 | 250.00 | 2.50% | 2500.00 | 250.00 | 25.00 |
| EUR/HUF | 14.00% | 17245.41 | 1724.54 | 172.45 | 1.40% | 1724.54 | 172.45 | 17.25 |
| USD/HUF | 10.00% | 10000.00 | 1000.00 | 100.00 | 1.00% | 1000.00 | 100.00 | 10.00 |
| EUR/PLN | 13.00% | 16013.60 | 1601.36 | 160.14 | 1.30% | 1601.36 | 160.14 | 16.01 |
| USD/PLN | 10.00% | 10000.00 | 1000.00 | 100.00 | 1.00% | 1000.00 | 100.00 | 10.00 |
Maintenance Margin Requirement is displayed as [MMR] in the [Simple Dealing Rates] window. This is the amount of Maintenance Margin deposit required for one lot of the applicable currency pair. If account equity falls below aggregate MMR, no new positions1 are allowed and the account enters into “liquidation only” mode.
The Liquidation Margin Requirement of an open position in each currency pair is equal to 10% of the Maintenance Margin Requirement of that currency pair. If account equity falls below aggregate Liquidation Margin Requirement at any time, a Liquidation Margin Call will trigger to liquidate all open positions.
Margin rates are subject to change without notice and it is the trader’s responsibility to ensure there is sufficient margin in the account at all times. Please review the MF Global FX Margin Policy & Procedures.
Margin Examples for U.S. Dollar Mini Accounts
The Initial Margin Requirement for opening a position in each currency pair is based on the Initial Margin Rate applied to the gross principal value of the contract, expressed in U.S. Dollars.
Once positions are opened, a minimum amount of equity called Maintenance Margin Requirement equal to the Initial Margin Requirement must be held in the account.
For currency pairs where the U.S. Dollar is the primary or secondary currency, the value of the contract in U.S. Dollars is used to calculate the Initial Margin and Maintenance Margin required in U.S. Dollars.
For example, a long 10K position in USD/JPY @ 95.00:
Initial Margin Rate on USD/JPY = 3%
Value of contract = US$10,000
Initial/Maintenance Margin = US$10,000 X 3% = US$300
Liquidation Margin = US$300 X 10% = US$30
For example, a long 10K position in GBP/USD @ 1.62493:
Initial Margin Rate on GBP/USD = 3.4%
Value of contract = US$16,249.30
Initial/Maintaining Margin = US$16249.30 X 3.4% = US$552.48
Liquidation Margin = US$ 552.48 X 10% = US$55.25
For currency pairs where the U.S. Dollar is neither the primary nor secondary currency, the value of the contract is converted to U.S. Dollars to calculate the Initial Margin and Maintenance Margin required in U.S. Dollars.
For example, a short 10K position in EUR/CHF @ 1.4753:
Initial Margin Rate on EUR/CHF = 6%
Value of contract = EUR10,000
Value of contract converted to US$ = EUR 10,000 @1.4341 = US$14,341.00
Initial/Maintenance Margin = US$ 14341.00 X 6% = US$860.46
Liquidation Margin = US$860.46 X 10% = US$86.05
1 Once account equity falls below Maintenance Margin Requirement and the [MC] status is at “W”, existing open positions in the account cannot be hedged until the [MC] status is reset to “N”.
Margin Requirements for Canadian Dollar Accounts
The following table displays the Initial, Maintenance and Liquidation Margin Rates of currency pairs traded at MF Global FX.
Also displayed are the Initial/Maintenance Margin Requirement and Liquidation Margin Requirement for currency pairs traded in a Canadian Dollar 100K, 10K & 1K Account.
| Initial / Maintenance Margin Req. | Liquidation Margin Req. | |||||||
| Currency Pair |
Margin Rate |
[MMR] C$ | Margin Rate |
[LMR] C$ | ||||
| 100K | 10K | 1K | 100K | 10K | 1K | |||
| EUR/USD | 6.30% | 7970.57 | 797.06 | 79.71 | 0.63% | 797.06 | 79.71 | 7.97 |
| USD/JPY | 8.80% | 9038.61 | 903.86 | 90.39 | 0.88% | 903.86 | 90.39 | 9.04 |
| GBP/USD | 7.10% | 10801.16 | 1080.12 | 108.01 | 0.71% | 1080.12 | 108.01 | 10.80 |
| USD/CHF | 6.30% | 6470.82 | 647.08 | 64.71 | 0.63% | 647.08 | 64.71 | 6.47 |
| EUR/CHF | 6.00% | 7591.02 | 759.10 | 75.91 | 0.60% | 759.10 | 75.91 | 7.59 |
| AUD/USD | 6.30% | 5584.60 | 558.46 | 55.85 | 0.63% | 558.46 | 55.85 | 5.58 |
| USD/CAD | 3.30% | 3389.48 | 338.95 | 33.89 | 0.33% | 338.95 | 33.89 | 3.39 |
| NZD/USD | 6.30% | 4507.84 | 450.78 | 45.08 | 0.63% | 450.78 | 45.08 | 4.51 |
| EUR/GBP | 6.80% | 8603.16 | 860.32 | 86.03 | 0.68% | 860.32 | 86.03 | 8.60 |
| EUR/JPY | 8.50% | 10753.95 | 1075.40 | 107.54 | 0.85% | 1075.40 | 107.54 | 10.75 |
| GBP/JPY | 9.30% | 14147.99 | 1414.80 | 141.48 | 0.93% | 1414.80 | 141.48 | 14.15 |
| CHF/JPY | 8.50% | 7744.59 | 774.46 | 77.45 | 0.85% | 774.46 | 77.45 | 7.74 |
| GBP/CHF | 6.80% | 10344.77 | 1034.48 | 103.45 | 0.68% | 1034.48 | 103.45 | 10.34 |
| EUR/AUD | 6.00% | 7591.02 | 759.10 | 75.91 | 0.60% | 759.10 | 75.91 | 7.59 |
| EUR/CAD | 3.00% | 3795.51 | 379.55 | 37.96 | 0.30% | 379.55 | 37.96 | 3.80 |
| AUD/CAD | 3.00% | 2659.34 | 265.93 | 26.59 | 0.30% | 265.93 | 26.59 | 2.66 |
| AUD/JPY | 8.50% | 7534.78 | 753.48 | 75.35 | 0.85% | 753.48 | 75.35 | 7.53 |
| CAD/JPY | 5.50% | 5500.00 | 550.00 | 55.00 | 0.55% | 550.00 | 55.00 | 5.50 |
| NZD/JPY | 8.50% | 6082.01 | 608.20 | 60.82 | 0.85% | 608.20 | 60.82 | 6.08 |
| GBP/CAD | 3.80% | 5780.90 | 578.09 | 57.81 | 0.38% | 578.09 | 57.81 | 5.78 |
| GBP/NZD | 6.80% | 10344.77 | 1034.48 | 103.45 | 0.68% | 1034.48 | 103.45 | 10.34 |
| GBP/AUD | 6.80% | 10344.77 | 1034.48 | 103.45 | 0.68% | 1034.48 | 103.45 | 10.34 |
| AUD/NZD | 6.00% | 5318.67 | 531.87 | 53.19 | 0.60% | 531.87 | 53.19 | 5.32 |
| AUD/CHF | 7.20% | 6213.96 | 621.40 | 62.14 | 0.72% | 621.40 | 62.14 | 6.21 |
| EUR/NZD | 6.00% | 7591.02 | 759.10 | 75.91 | 0.60% | 759.10 | 75.91 | 7.59 |
| USD/ZAR | 28.30% | 29067.35 | 2906.74 | 290.67 | 2.83% | 2906.74 | 290.67 | 29.07 |
| USD/SGD | 13.30% | 13660.63 | 1366.06 | 136.61 | 1.33% | 1366.06 | 136.61 | 13.66 |
| USD/HKD | 13.30% | 13660.63 | 1366.06 | 136.61 | 1.33% | 1366.06 | 136.61 | 13.66 |
| USD/TRY | 28.30% | 29067.35 | 2906.74 | 290.67 | 2.83% | 2906.74 | 290.67 | 29.07 |
| EUR/TRY | 28.00% | 35424.76 | 3542.48 | 354.25 | 2.80% | 3542.48 | 354.25 | 35.42 |
| USD/SEK | 7.50% | 7703.36 | 770.34 | 77.03 | 0.75% | 770.34 | 77.03 | 7.70 |
| USD/DKK | 13.30% | 13660.63 | 1366.06 | 136.61 | 1.33% | 1366.06 | 136.61 | 13.66 |
| EUR/SEK | 6.00% | 7591.02 | 759.10 | 75.91 | 0.60% | 759.10 | 75.91 | 7.59 |
| EUR/NOK | 6.00% | 7591.02 | 759.10 | 75.91 | 0.60% | 759.10 | 75.91 | 7.59 |
| USD/NOK | 7.50% | 7703.36 | 770.34 | 77.03 | 0.75% | 770.34 | 77.03 | 7.70 |
| USD/MXN | 6.30% | 6470.82 | 647.08 | 64.71 | 0.63% | 647.08 | 64.71 | 6.47 |
| GBP/SEK | 6.80% | 10344.77 | 1034.48 | 103.45 | 0.68% | 1034.48 | 103.45 | 10.34 |
| NOK/JPY | 8.50% | 1363.80 | 136.38 | 13.64 | 0.85% | 136.38 | 13.64 | 1.36 |
| SEK/JPY | 8.50% | 1121.00 | 112.10 | 11.21 | 0.85% | 112.10 | 11.21 | 1.12 |
| SGD/JPY | 15.50% | 11423.24 | 1142.32 | 114.23 | 1.55% | 1142.32 | 114.23 | 11.42 |
| HKD/JPY | 15.50% | 2043.18 | 204.32 | 20.43 | 1.55% | 204.32 | 20.43 | 2.04 |
| ZAR/JPY | 30.50% | 4130.75 | 413.08 | 41.31 | 3.05% | 413.08 | 41.31 | 4.13 |
| NZD/CHF | 6.00% | 4293.18 | 429.32 | 42.93 | 0.60% | 429.32 | 42.93 | 4.29 |
| CAD/CHF | 3.00% | 3000 | 300.00 | 30.00 | 0.30% | 300.00 | 30.00 | 3.00 |
| NZD/CAD | 3.00% | 2146.59 | 214.66 | 21.47 | 0.30% | 214.66 | 21.47 | 2.15 |
| CHF/SEK | 6.00% | 5466.77 | 546.68 | 54.67 | 0.60% | 546.68 | 54.67 | 5.47 |
| CHF/NOK | 6.00% | 5466.77 | 546.68 | 54.67 | 0.60% | 546.68 | 54.67 | 5.47 |
| EUR/CZK | 13.00% | 16447.21 | 1644.72 | 164.47 | 1.30% | 1644.72 | 164.47 | 16.45 |
| USD/CZK | 13.30% | 13660.63 | 1366.06 | 136.61 | 1.33% | 1366.06 | 136.61 | 13.66 |
| EUR/DKK | 13.00% | 16447.21 | 1644.72 | 164.47 | 1.30% | 1644.72 | 164.47 | 16.45 |
| USD/RUB | 28.30% | 28759.22 | 2875.92 | 287.59 | 2.83% | 2875.92 | 287.59 | 28.76 |
| EUR/HUF | 13.00% | 16447.21 | 1644.72 | 164.47 | 1.30% | 1644.72 | 164.47 | 16.45 |
| USD/HUF | 13.30% | 13660.63 | 1366.06 | 136.61 | 1.33% | 1366.06 | 136.61 | 13.66 |
| EUR/PLN | 13.00% | 16447.21 | 1644.72 | 164.47 | 1.30% | 1644.72 | 164.47 | 16.45 |
| USD/PLN | 13.30% | 13660.63 | 1366.06 | 136.61 | 1.33% | 1366.06 | 136.61 | 13.66 |
Maintenance Margin Requirement is displayed as [MMR] in the [Simple Dealing Rates] window. This is the amount of Maintenance Margin deposit required for one lot of the applicable currency pair. If account equity falls below aggregate MMR, no new positions1 are allowed and the account enters into “liquidation only” mode.
The Liquidation Margin Requirement of an open position in each currency pair is equal to 10% of the Maintenance Margin Requirement of that currency pair. If account equity falls below aggregate Liquidation Margin Requirement at any time, a Liquidation Margin Call will trigger to liquidate all open positions.
Margin rates are subject to change without notice and it is the trader’s responsibility to ensure there is sufficient margin in the account at all times. Please review the MF Global FX Margin Policy & Procedures.
1 Once account equity falls below Maintenance Margin Requirement and the [MC] status is at “W”, existing open positions in the account cannot be hedged until the [MC] status is reset to “N”.
Risk & Leverage
As a regulated member of the industry, MF Global FX follows IIROC rules on proficiency, capital adequacy and margin requirements. IIROC has prescribed minimum margin rates for forex contracts that are significantly higher (i.e., more restrictive) than the rates offered by many unregistered forex dealers. As a result, traders with these entities are able to take significantly larger positions and become significantly more exposed to gains and losses based on movement in the price of the underlying currency.
MF Global FX has been trading online retail forex with clients since 2003. In our experience, many traders prefer low margins. Given that online forex trading is generally facilitated with an element of leverage, we should examine whether higher leverage necessarily leads to larger profits. We often hear that leverage is a double-edged sword. Risk disclosures routinely warn that although high leverage may produce significant returns, it could also lead to large losses. So why do many unregistered dealers constantly lower the threshold to entice traders with margins of 0.5%, or even as low as 0.25%?
200:1 or 33:1 - Does Lower Leverage Reduce Risk?
First of all, the prospect of a high payout with a small initial deposit appeals to novice traders who have not adequately evaluated the risks. Secondly, low margin requirements enable traders with meager capital to participate in a highly speculative market where competing investments would require a much larger down payment.
Regulators argue that using high leverage in the forex market lowers a trader’s safety margin against adverse market conditions. These risks are exaggerated by random short term volatility driven by the constant release of financial, economic and political news. They are further compounded by trader psychology that sometimes produces irrational behavior at odds with stated financial goals.
The following illustrates 2 typical traders: Trader A (aggressive) and Trader B (conservative).
| Trader A | Trader B | |
| Equity | $2,000 | $10,000 |
| Maximum Leverage | 200:1 | 33:1 |
| Position in Market | EUR/USD 200,000 | EUR/USD 100,000 |
| Leveraged Contract Value | $300,000 | $150,000 |
| Used Margin | $1,500 | $4,500 |
| Used Margin/Equity | 75% | 45% |
| Pip Value | $20 | $10 |
| Free Margin @1.50 | $500 | $5,500 |
Trader A is a novice trader who is convinced that low margins can produce outsized profits. He has seen promotional materials from an unregistered dealer advertising low margins and high returns. With $2,000 he opens a 100K account with 0.5% margin or 200 times leverage.
Trader B is an experienced trader who is aware of the risks in speculating on the forex market. He takes a conservative approach and opens a mini account with a $10,000 deposit at an IIROC regulated dealer. The account is eligible for CIPF protection, and major currency pairs are margined at 3%.
Both traders buy EUR/USD at 1.5000.
Trader A is determined to get the biggest bang for his buck. He buys a maximum position (2 100K lots) of 200,000 EUR/USD with a margin deposit of $1,500, leaving $500 of free margin to ride out the volatility.
Trader B is more prudent with using leverage in his account. He buys a position (10 mini lots) of 100,000 EUR/USD with a margin deposit of $4,500, leaving $5,500 of free margin to cushion against potential drawdown.
Scenario 1
| Trader A | Trader B | |
| Realized Profit | $2,000 | $1,000 |
| Return on Equity | 100% | 10% |
| Return on Used Margin | 133% | 22% |
Shortly after the positions are taken, EUR/USD rises to 1.51. Both traders close their positions. Trader A realizes a profit of $2,000, which translates into a return on equity of 100%, or a return on used margin of 133%. Trader B books a more modest profit of $1,000, which translates into a less impressive return on equity of 10%, or a return on used margin of 22%.
Trader A becomes the forex market’s poster child for low margin, high leverage and fast profits.
Scenario 2
| Trader A | Trader B | |
| Unrealized Loss | $400 | $200 |
| Free Margin @1.4980 | $100 | $5,300 |
| Price @ MC Liquidation/Warning | 1.4975 | 1.445 |
Not long after the positions are taken, EUR/USD dips to 1.4980. Next support level is at 1.4975. Trader A is 5 pips away from margin call liquidation. Trader B is 530 pips away from Maintenance Margin Warning. Trader A has no room to maneuver. Trader B could test the 1.4975 support level by adding to existing position (because he has sufficient free margin), and exit the entire position if support breaks.
In a drawdown, Trader A would be a typical example of how inexperience and aggressive leverage can impact an under-capitalized account.
The above highlights the effect of leverage on the traders’ accounts during a drawdown scenario. With few exceptions, a trader is exposed to more risk as leverage increases, and his account gets wiped out sooner because it cannot withstand market volatility.
The question traders need to ask themselves is: Even assuming that a correct call has been made on the direction of a currency pair, what are the odds of it moving from price A to price B in a linear fashion, without any temporary setback that may require additional margin funds to cushion the volatility and a potential drawdown?
100:1 or 33:1 - A Different Look at Risk vs Leverage
You would have likely seen the above illustration from those who advocate lower leverage in retail forex. However, one might just as easily argue that leverage on its own does not capture the entire risk profile of the trader, especially leverage as stipulated by regulators in some jurisdictions, which is defined as the maximum gearing that a dealer can allow in a trader’s account.
Leverage is only one component of the overall risk picture. Limiting leverage by itself does not mitigate risk. Only stops or draw down limits can control risk. The maximum leverage determines the margin requirement of the trade. For example, let us consider 2 traders each with $10,000 in their accounts. Trader X opening a $100,000 position in a 1% account (100:1 max leverage) would require $1,000 for margin, whereas Trader Y in a 3% account (33:1 max leverage) would require $3,000 margin for the same position.
If the positions in both accounts are protected by a 50 pip stop, then the risk to either account is limited to 50 pips, regardless of the leverage. The difference in leverage comes into play when neither trader uses stops and instead relies only on the liquidation mechanism as stop loss when maximum leverage is exceeded.
In that case, Trader X would be margined out when his equity has fallen by 90%, whereas Trader Y would be margined out sooner, at a 70% draw down in equity. So the higher margin requirement or lower leverage does reduce losses, under some conditions, but especially when stops are not in place.
Although the maximum buying power in a trader’s account is a function of leverage, in the real world hardly any trader, even the most inexperienced, would open an account and immediately leverage his entire equity on one trade. In fact, next to setting stops, the next critical element of risk management is to maintain a ratio between used and free margin that may cushion any unforeseen setbacks if stops were not placed or executed according to instructions.
That ratio may be 50:50, or some other numbers deemed acceptable to the trader based on the currency pair, the margin requirement, and the length of the exposure, etc. This ratio is equally important whether the maximum leverage is 100:1 or 33:1. However, open positions in the account limited to 33:1 leverage ties up more free margin and reaches the critical threshold sooner, handicapping the more conservative trader.
Traders should always trade with stops, because placing stops on open positions is the only way to effectively control risk in most situations. However, since stops are not completely failsafe and not everyone trades with stops, a safety margin should also be maintained between used and free margin in the account at all times.
In the real world many traders utilize only a portion of the free margin as determined by the maximum leverage. In fact, the key would appear to be that one should trade a highly leveraged account as if it were leveraged much lower, so that the safety margin is always available. Some may argue that this safety margin amounts to leaving idle cash in the account. That may be true, but it also means that the account has a better chance to withstand random volatility that might otherwise wipe out others.
The following illustrates the 2 traders discussed above: Trader X (100:1 max leverage) and Trader Y (33:1 max leverage)
| Trader X | Trader Y | |
| Equity | $10,000 | $10,000 |
| Maximum Leverage | 100:1 | 33:1 |
| Position in Market | USD/CAD 100,000 |
USD/CAD 100,000 |
| Required Margin | $1,000 | $3,000 |
| Used Margin vs Free Margin | 10:90 | 30:70 |
| Effect on equity if 50 pip S/L hit | -C$500 | -C$500 |
| Effect on equity if margined out | -$9,000 or 90% | -$7,000 or 70% |
Why is leverage used at all?
Contrary to popular misconception, most major currency pairs in the forex market barely move more than 1 - 2% a day. Even after the release of major economic data markets rarely move more than 2%. Compare that to the stock market where it is not uncommon for some issues to move 15% to 20% after earnings surprises. Furthermore, countries in the developed world do not go bankrupt, and their currencies do not become worthless overnight. One could invest in currencies fully paid up, but it would take substantial capital to produce meaningful returns.
Leverage or gearing is introduced to deploy capital more efficiently. When judiciously applied it could be an effective enhancing tool for an experienced trader to capitalize on opportunities with manageable risk. Its imprudent and excessive use, however, will destroy equity and quickly wipe out any trader who does not properly assess its risks.
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MF Global Canada Co. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. MF Global Canada Co. is also an approved participant of the Montreal Exchange, and a clearing participant and registered futures commission merchant of ICE Futures Canada.
MF Global FX is a division of MF Global Canada Co., a wholly owned subsidiary of MF Global Holdings Ltd.[NYSE:MF]. MF Global FX is compensated for its services through the bid ask spread.
