FXCM LLC (US) Standard, FSS, Active Trader, MT4 – FAQ

1) What is the new margin requirement?

CFTC approved NFA amendments to Section 12 of NFA rule book, which requires FDM’s to collect a margin deposit of 1% of the notional value of the positions held in the US dollar, 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 and 4% of the notional value of other positions.

This simply means that you will be required to put up more margin to open a new position or hold on to an existing position based on currency pair.

Starting November 22nd, new FXCM LLC margin requirements will be.

2) When does the new rule go into effect?

The new NFA margin rule goes into effect on November 30t.h However, FXCM will be adjusting client margin levels, in preparation for this change, on Sunday November, 22nd.

3) Will my account be affected by this change?

All accounts held with Forex Capital Markets LLC (FXCM) will be subject to the new margin requirements.

• All positions and orders established after November 22nd will be subject to the new margin requirements.

• Additionally, open trades and active orders initiated prior to November 22nd will also be subject to the new margin requirements.

4) What if you had changed your default margin to be above 1.0%?

Clients who currently have their margin level set above 1% will not see that level change after November 22nd. However, the actual currency denominated margin requirement will change. For example, if your account is set at 2%, your NEW margin requirement will simply be twice the amount that is listed in the above Margin Table.

As an example, the minimum margin requirement for the EUR/USD is listed as $160. Clients with a 2% margin level would be required to maintain $320 ($160 X 2) for a EUR/USD position. Clients with a 3% margin level, $480 ($160 X 3) for a EUR/USD position.

Your current margin rate can be changed to the default rate (1%) by logging in to MyFXCM.com and completing the margin change request form.

5) Why did NFA approve amendments to increase margin requirements?

NFA is concerned that higher leverage amounts can deplete a customer’s account balance — and result in forced liquidation — much faster than retail customers realize.

FXCM agrees in principle with the NFA’s intention for changing margin requirements. We have seen that clients who trade with more conservative leverage tend be more successful over an extended time period. When an account uses a high degree of leverage, a few losing trades can offset many winning trades. The new margin requirements are intended to protect forex traders from using excessive leverage.

6) Why Is Lower Leverage Important?

The combination of high leverage and volatile currencies can be extremely dangerous. Accounts that trade the most volatile pairs, such as GBP/USD and GBP/JPY, with the maximum amount of leverage tend to have less positive performance. On the other hand, traders that focus on less volatile currencies, such as USD/JPY and AUD/USD, and use more conservative leverage may do better. When trading volatile currencies with high leverage, one bad trade can wipe out the profits from many good trades. By trading with less leverage, a trader can lower their risk of a big drawdown from one bad trade.

7) How Do The New Margin Levels Compare to Other Markets?

In the U.S. equity markets, most traders are limited to using 2:1 leverage in their trading. Another way of stating this is that a minimum of 50% of the notional transaction size is required as margin. Additionally, as of this writing, the initial margin requirement on a $125,000 EuroFX futures contract (EUR/USD) is about $4,725. That’s roughly a 4% initial margin requirement or roughly 25:1 leverage.

8) Will my positions be margined out?

That depends on how much leverage you are utilizing when the new margin requirements take effect. We have put together a few guides to help you determine if you have sufficient margin to prevent positions from being liquidated.

You can WATCH THIS VIDEO to see exactly what steps we recommend taking.

We have also outlined the steps discussed in the above video for you here:

1) On a piece of paper, write down the trade details for each trade you currently have open

• Include the currency pair and the trade size, like this: EUR/USD 10,000 (10,000 = 1 lot)

2) Next, write down the NEW margin requirement for each trade

• For example, EUR/USD 10,000 $160

3) Next, multiply the NEW margin requirement by the number of lots traded

• For example, $160 X 1 lots = $160

4) Finally, add up all of the new margin levels that you just calculated.

5) This number is your NEW used margin (USD MR). Subtracting this from your equity will give you your usable margin (USBL MR).

* Remember, when your usable margin (USBL MR) drops below zero your live trades are triggered to be liquidated.

9) Where do I find up-to-date margin requirements?

Up-to-date margin requirements are and will continue to be displayed in the Simplified Dealing Rates window of the trading platform by currency pair.

To access the simple dealing rates window:

• Login to the FXCM Trading Station II platform

• Click on the Simple Dealing Rates tab within the dealing rates section of the platform (typically in the top left-hand corner of the platform)

• The margin requirements will be listed by currency pair from the MMR column (the values listed represent the minimum margin required for each 10K lot traded).

10) How are the NEW margin requirements calculated?

The NFA rule states that forex dealer members are required to collect a margin deposit of 1% of the notional value of the positions held in the US dollar, 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 and 4% of the notional value of other positions.

Directly adhering to the 1% and 4% margin requirements would cause margin amounts to change as market rates fluctuate. For traders, this would mean watching not only your trades, but monitoring frequently changing margin levels.

At FXCM, we have learned that many clients like trading with fixed margins. Therefore, we have decided to add a slight cushion to the new NFA requirements that should help alleviate daily or even weekly fluctuations. In most cases, the cushion we have added means that margin levels should not change more than once a month. Additionally, to further keep things simplified, margin levels will only go up or down in increments of $10.

When it becomes necessary for margin requirements to change, we will attempt to notify clients by sending pop-up messages via the trading station at least 24 hours prior to the change.