Change in margin requirement

[cate]

Hi,

Last time I traded EUR/TRY about a week ago, the margin required for one mini contract was about £660 but tonight I see it is £1.286. The contract size hasn't changed, so I'm assuming it must be the margin rate that has gone up. It's 15% now, but unfortunately I didn't notice what it used to be - I'm assuming it must have been about half that. Can I just check what would have happened if I'd left a limit order to trade EUR/TRY? I'm worried that I might have opened the order thinking I only needed £660 margin, and then suddenly it would have taken the new higher amount and I might not have had enough free margin in my account and ended up with a margin call. Is that what would have happened, or would the system have automatically cancelled my order when the margin requirement changed?

Thanks very much,

Cate

[WarickLewis]

I came to ask a similar question. I hope you get an answer

[cate]

Hi @WarickLewis,

Maybe we should try tagging someone at IG like @KoketsoIG . Fingers crossed we get an answer!

Cate

[TheGuru12]

EUR/TRY would be an exotic pair and quite volatile at times so I imagine there's a higher margin requirement for erratic levels of liquidity. 

[cate]

1 hour ago, cate said:

Maybe we should try tagging someone at IG like @KoketsoIG .

 

It doesn't seem to have recognised @KoketsoIG as a valid username. So I'm trying it again and also tagging @JamesIG. Strange, this time it seems happy with the name. 

Thanks, Cate

[cate]

2 minutes ago, TheGuru12 said:

EUR/TRY would be an exotic pair and quite volatile at times so I imagine there's a higher margin requirement for erratic levels of liquidity. 

Hi @TheGuru12,

Thanks for your comment. I think of EUR/MXN as fairly exotic too, and that's had a constant margin requirement for as long as I've traded it (a couple of years). Up to a few days ago they both had about the same requirement, which was already higher than more mainstream pairs like EUR/USD, and then suddenly without warning EUR/TRY jumped. Generally low liquidity just results in the spread blowing out - EUR/TRY jumps from about 120 pip spread to 700 or 800 in the approach to 10pm roll, but that's not unexpected. 

If it's true that some currencies are liable to go from about 5% to 15% without warning it's a bit alarming, and it would be good to hear from IG which currencies that might apply to. What I'm worried about is what happens to open positions and to orders when the margin changes? 

Cate

[KoketsoIG]

On 25/03/2024 at 23:07, cate said:

Hi,

Last time I traded EUR/TRY about a week ago, the margin required for one mini contract was about £660 but tonight I see it is £1.286. The contract size hasn't changed, so I'm assuming it must be the margin rate that has gone up. It's 15% now, but unfortunately I didn't notice what it used to be - I'm assuming it must have been about half that. Can I just check what would have happened if I'd left a limit order to trade EUR/TRY? I'm worried that I might have opened the order thinking I only needed £660 margin, and then suddenly it would have taken the new higher amount and I might not have had enough free margin in my account and ended up with a margin call. Is that what would have happened, or would the system have automatically cancelled my order when the margin requirement changed?

Thanks very much,

Cate

Hi @cate,

Please note that the margin requirement has not been changed, it has always been higher at 15% compared to the rest of the pairs. As @TheGuru12 mentioned, the pair has a higher margin as it is volatile and not as liquid as major pairs.

Thanks,

KoketsoIG

[cate]

3 hours ago, KoketsoIG said:

Hi @cate,

Please note that the margin requirement has not been changed, it has always been higher at 15% compared to the rest of the pairs. As @TheGuru12 mentioned, the pair has a higher margin as it is volatile and not as liquid as major pairs.

Thanks,

KoketsoIG

Hi @KoketsoIG,

Now I'm really puzzled! If the margin rate hasn't changed the only other reason for the margin required to have doubled would be if the old deal tickets used to be for a 0.5 contract. But I've just checked my transaction history, and the last position I closed in the EUR/TRY (a week ago) shows as -1, so a full mini contract. But the margin requirement was quite definitely six hundred and something pounds, half what the deal tickets are showing now.

I've also just investigated the TRY/JPY where I currently have three positions open. It shows as requiring a 15% margin too, like EUR/TRY, and when I open a deal ticket I discover that again the margin required is about double what it was when I opened the positions a couple of weeks ago. Because the notional is TRY10,000 for these contracts, each one is tiny, so I wouldn't have noticed a big change in my capital "available to deal" if the margin on each one had doubled, so unless there's some way of seeing how much margin each position is currently using I can't check whether that has doubled from when I opened them. (Is there some way of doing that?) But the margin required on the deal tickets has definitely changed in exactly the same way as the EUR/TRY .

If the margin rate hasn't changed in the last week, can you explain what's happened? The only other possible explanation is that previously the system was calculating the 15% margin incorrectly and now someone has noticed and corrected the code, but that seems unlikely. Can the tech team see into my past trades and be able to work out what happened? The reference for my last EUR/TRY trade was PP4VTGAY if that helps them to identify it. 

I understand that the TRY is an "exotic" currency, and I'm not questioning why the rate should be set at 15%, I'm just worried about what the sudden change means about an instability in the system, and a hidden risk that I'm not aware of.

Thanks,

Cate

[neueneuen]

5 hours ago, KoketsoIG said:

Hi @cate,

Please note that the margin requirement has not been changed, it has always been higher at 15% compared to the rest of the pairs. As @TheGuru12 mentioned, the pair has a higher margin as it is volatile and not as liquid as major pairs.

Thanks,

KoketsoIG

Hi @KoketsoIG,

I hope you are well.

Tier 1 margin requirement for at least USD/TRY, GBP/TRY, and EUR/TRY was 7.5% at least between February 28 and March 22 this year.

Could you kindly investigate further, please?

WBR

Edited March 27 by neueneuen

[neueneuen]

@cate, if you find an email with the subject "Your IG Statement - DD MMM YYYY" daily sent to you when you have open positions or trades, there, in the "FINANCIAL CURRENT OPEN POSITIONS" table you would be able to compare "Notional Value" to "Deposit Required" and confirm that Tier 1 margin requirement was 7.5% up until the end of last week at the very least.

Edited March 27 by neueneuen

[cate]

1 hour ago, neueneuen said:

@cate, if you find an email with the subject "Your IG Statement - DD MMM YYYY" daily sent to you when you have open positions or trades, there, in the "FINANCIAL CURRENT OPEN POSITIONS" table you would be able to compare "Notional Value" to "Deposit Required" and confirm that Tier 1 margin requirement was 7.5% up until the end of last week at the very least.

Hi @neueneuen,

I'm so grateful for you commenting on this thread! And for the advice on where to find a record of what the margin percentage used to be. 

So looking at my statement of the 20th March, I held a position in EUR/TRY and the notional value (in TRY) was 344,731.70 and the deposit required was 26,558.20 which means the margin was 7.5% of the notional, which explains why the margin requirement has now doubled. @KoketsoIG could you investigate this? There was no warning from IG that there was going to be a change to the margin requirement, and so I'm still worried about what would have happened to open positions when that change came in. Normally, when we're notified in advance that there's going to be a change, the requirement on open positions increases which is fine if we know that's coming and can make sure we have enough margin available. 

Thanks again, @neueneuen!

Cate

 

[KoketsoIG]

14 hours ago, cate said:

Hi @neueneuen,

I'm so grateful for you commenting on this thread! And for the advice on where to find a record of what the margin percentage used to be. 

So looking at my statement of the 20th March, I held a position in EUR/TRY and the notional value (in TRY) was 344,731.70 and the deposit required was 26,558.20 which means the margin was 7.5% of the notional, which explains why the margin requirement has now doubled. @KoketsoIG could you investigate this? There was no warning from IG that there was going to be a change to the margin requirement, and so I'm still worried about what would have happened to open positions when that change came in. Normally, when we're notified in advance that there's going to be a change, the requirement on open positions increases which is fine if we know that's coming and can make sure we have enough margin available. 

Thanks again, @neueneuen!

Cate

 

Hi @cate and @neueneuen,

Apologies for any inconvenience caused. Please note that the base margins on all TRY pairs were increased due to Turkish local elections. This increase is for new positions only. They will revert to 7.5% next week. Again, apologies for any inconvenience and confusion. I hope this clears up any confusion.

All the best,

KoketsoIG

[cate]

Thanks very much, @KoketsoIG. That's much better than I thought it might be. 

Best wishes,

Cate

[AhmedMarsh]

Demo account: Please note that conditions on demo accounts may differ from real accounts. Some brokers may only provide overnight loans on real accounts and not on demo accounts.

[ChannelCam]

Hi Cate,

I've noticed the exact same thing when trying to set up my set-ups. Margin requirement has roughly doubled in the indices I'm trading (FTSE100, German40, and US Tech100).

 

@KoketsoIG can you please respond?

 

Thanks,
Cameron

Quote

 

 

[KaseyReyes]

If you had left a limit order based on the previous margin requirement, it's likely the system would've adjusted it to match the new rate once it changed. This helps prevent any unexpected margin calls. However, it's always wise to double-check your orders, especially when there are fluctuations in margin requirements. 

Edited May 23 by KaseyReyes

[cate]

On 28/03/2024 at 06:09, KoketsoIG said:

Hi @cate and @neueneuen,

Apologies for any inconvenience caused. Please note that the base margins on all TRY pairs were increased due to Turkish local elections. This increase is for new positions only. They will revert to 7.5% next week. Again, apologies for any inconvenience and confusion. I hope this clears up any confusion.

All the best,

KoketsoIG

Hi @KoketsoIG and @neueneuen,

The TRY pairs have changed their margin requirement again without any warning. EUR/TRY now requires 25% margin. Do you know why this happened without any notification that a margin change was coming? Is it a permanent change this time?

I wish IG we're clearer about what's going on with margin changes. We've been told things will change on 11th June but no indication of what the changes will be. And this change in the TRY has come earlier than any changes were meant to happen.

I've included you @neueneuen in case you're still also trading the TRY pairs. 

Best wishes,

Cate

 

[neueneuen]

@cate, as far as I've been told, morning May 24 IG liquidity provider notified them about some market discovery along the lines of "the market is pricing in future Turkish central bank rate decline hence we need to increase the margin requirement and this is why swap was so low for overnight May 23-24". Swap bid was applied that day at 6.8% annualized (and swap was applied at around 10:30 am BST which is ~2 hours later than usual at IG and 14.5 hours later than the end of the trading day when overnight is supposed to be calculated - swap bid shown on the platform was lowered right before 10:30 am which is not how overnight should work) for USD/TRY which is roughly 7.35 times less than the CB rate and several times less than short term swap rate that day. As far as I understand, there is no relation to June 11 margin changes. As far as I understand, IG does not know whether the margin returns to the previous values and when.

This does not make any sense to me.

Edited June 5 by neueneuen

[cate]

Thanks so much, @neueneuen, I really appreciate all that. It seems a bit bizarre, doesn't it? I wish IG were a bit more upfront about it all. It's not very reassuring having to dig like this to try to find what's going on. 

 

[neueneuen]

@cate, fully agree. Not even from the best client experience standpoint (which I, as a client, want, but I appreciate businesses sometimes have misaligned incentives with their clients despite what Principles from the FCA Handbook might tell us) but from a profit for IG standpoint.

If they're doing things right (and if they're not, they have bigger problems than a few FOREX pairs), they get X% of profit per volume traded and per volume overnighted, so maximizing volume their clients trade should be beneficial for them. Increasing margin requirements 25%/7.5%=3.33 times means there would likely be 3.33 times less volume, hence 3.33 times less profit for IG no matter the client profit or losses. Especially in the case of TRY pairs, where minimum trade is so high (~£50k min margin requirement for EUR/TRY after margin requirement changes) that most would not even be able to make a trade at all with new margin requirements as they don't have enough deposit.

As far as I can tell, market conditions for TRY have not changed in any way to make this margin requirement change necessary. During the elections it was more understandable.

Unless their goal is to stop clients from trading these pairs.

 

As I said, this does not make any sense to me at all.

Edited June 5 by neueneuen

[cate]

@neueneuen Absolutely! I do wonder if you're right and they're trying to stop us trading some of the pairs altogether. 

[cate]

@neueneuen I just wanted to let you know that I've finally managed to get my hands on a document from IG that lays out the proposed margin changes that come into effect on 11th June. It looks as though only about a dozen commods and the dollar basket will have their rates increase. The helpdesk also included a full table of FX rates and rather extraordinarily the TRY pairs are all showing a 5% margin for Tier 1. I can't quite believe it's true, given that at its best the rate was 7.5% before the current jump to 25%. 

Waiting to see what actually happens on the 11th...

 

[neueneuen]

@cate, June 11 is behind us, Tier 1 margin for TRY pairs has been set at 15%, not 5%. Pity.

Edited June 12 by neueneuen

[cate]

3 hours ago, neueneuen said:

@cate, June 11 is behind us, Tier 1 margin for TRY pairs has been set at 15%, not 5%. Pity.

@neueneuen As I seem to keep saying on this topic - it's bizarre. Why publish a document showing the rate at 5% if they don't intend to stick to it?

@KoketsoIG do you know if this change to 15% for the TRY pairs is permanent, or if there's some temporary reason and it's going to settle down? The document the help desk sent me showed a published rate of 5% margin effective from 11th June.

Would really appreciate IG sorting this out. The rate used to be 7.5%, then went to 15%, then 25% and now again 15%. I've been trying to test out a trading strategy, but keep finding the margin isn't what I expect it to be and so I can't take the trade my system is telling me to.

Thanks,

Cate

 

[KoketsoIG]

19 hours ago, cate said:

@neueneuen As I seem to keep saying on this topic - it's bizarre. Why publish a document showing the rate at 5% if they don't intend to stick to it?

@KoketsoIG do you know if this change to 15% for the TRY pairs is permanent, or if there's some temporary reason and it's going to settle down? The document the help desk sent me showed a published rate of 5% margin effective from 11th June.

Would really appreciate IG sorting this out. The rate used to be 7.5%, then went to 15%, then 25% and now again 15%. I've been trying to test out a trading strategy, but keep finding the margin isn't what I expect it to be and so I can't take the trade my system is telling me to.

Thanks,

Cate

 

Dear @cate,

Thank you for your post. Please note that the 15% is part of our non-shares margin review. The margin on TRY pairs was set to 25% for new positions as of 25 May. These were recently decreased from 25% to 15%.

Thanks,

KoketsoIG

[bocaj1913]

As an investor, you should have been more sensitive about this issue. Higher commissions are charged on margins for assets with extreme volatility. The Turkish lira has this problem, it looks risky even now.

[cate]

9 hours ago, KoketsoIG said:

Dear @cate,

Thank you for your post. Please note that the 15% is part of our non-shares margin review. The margin on TRY pairs was set to 25% for new positions as of 25 May. These were recently decreased from 25% to 15%.

Thanks,

KoketsoIG

Thanks, @KoketsoIG. I'm only confused because when I wrote to the helpdesk on 6th June, they sent me a document called FX_TIERED_MARGIN_RETAIL which they said was a list of the new margin requirements that would come into effect on 11th June. It shows (Tier 1) EUR/TRY 5% and TRY/JPY 5%

I think they must have sent the wrong document. Could you give me a link to the place on the website that has an up to date table of margin requirements?

Best wishes,

Cate