A newbie to this site and wanted some thoughts on the following:
I have been trading with a spread betting firm and they increased their margin requirements today ahead of next week’s election. My open positions have guaranteed stops which were done when I opened the orders last week so I was arguing I shouldn’t have to put up more margin as the stops have already been guaranteed to close at the price that has been set - am I right with this logic? Otherwise I don’t see the point in the guaranteed stops and why I paid the premium. They’re saying it’s either more margin or my positions get closed, regardless of the gauranteed stops.
Grateful for any insight from more professional folks.
ITs looking to be a very volatile election and no stop are guaranteed if spreads widen or gaps are made in the market. So thats why they are saying more margin and close the trades. I just had to do this myself and take a loss on the week even though I had a couple positions going for me that would have most likely got me to at least BE or a small amount of profit for the week but there is no telling whats going to happen in the election or how the market will react to it so its better to just wait it out if you are a position trader and it sounds like you are. Even if you have to eat a loss it is better than price gapping over your stop and it not being honored the losses can be much much much worse
Apparently your broker is not the only one doing this as mine is to as if you are in the USA it is a NFA requirement. They have to obey the regulations of the nanny state
Hey guys, thanks for the quick responses. I get that they’re increasing the margin due to potential volatility, but if I’ve already placed and paid for a guaranteed stop attached to my trades then isn’t that where I will get stopped out, regardless of margin? That’s how I’m thinking about it.
I just called another broker and they said if there was a guaranteed stop on their platform ahead of the margin increase, then that position wouldn’t be affected and wouldn’t require more margin - so my line of thinking. I’m wondering if my broker now just has a system limitation and I should raise it further/complain.
Are you in the USA? If so it is a requirement from the NFA beginning Nov 7th on all GBP pairs. Minimum margin requirement is 5%. Not sure if this is you situation but it could be.
(i) There may be something in the small print that says they reserve the right to do this at such times, and …
(ii) Unfortunately, even if there isn’t, possibly the only way for you to prevent their doing it is by simply refusing, letting them close the positions and complaining to the regulator. In these situations, because they’re (essentially) a counterparty, as spread-betting forms effectively are, they have all the control: they hold your deposit; they make up the rules; they interpret the rules; they sometimes take advantage of unusual situations knowing that clients don’t have time to go to the regulator, etc. etc. etc.
You need to be very sure of your ground, to argue it with them.
(I’m assuming you’re in the UK, because you said “spread-betting”, and spread-bet companies don’t accept US clients, as far as I know?)
the required margins are a security concept against high vokatility. it happens sometimes that at high volatility actions/impacts the trading algorithms can not perform quickly enough and put retail traders out of their positions before the available margin goes into negative. sometimes the traders account aswell goes into minus and big minuses. if many traders go into big minuses it creates 2 problems for the broker:
1st. The money the retail trader owes the broker in a lot kf cases is not collactable - traders will continue to owe the broker the money
2nd. the broker has liabilities and debts towards 3rd parties and market makers whi took the opposite of the retail traders side. this liability a d debt must be paid in order for the broker to stay in business and not go into bancruptcy. this money is the money from the retail traders who owe the broker but dont pay.
so the marhin requirement are not connected to stop losses or guaranteed stop losses as guaranteed stop losses are a service from the BROKER who guarantees them and not providet by tge nature of the market. it functions like this: you got guaranteed stop loss that will close at a rate. if the broker on the counterside of the trade (with a market maket/bank) can not close YOUR contract with the same rate and has a loss then your broker will accept that loss as his loss and not your loss. the vroker looses more then planned/anticipated = therefore guaranteed stop losses cost YOU money and the normal stop losses are free.
the margin requirements only serve as security fir the broker that you can pay for your losses. in high impact news and expected volatile times the margin gets higher so the broker cam secure that YOU can pay the debt of a potential loss you take on your trades. this leads you to either put more money in ir to lower/close your positions and take a snaller leverage size (instead of 1:50 you have then 1:10 for example) making yiur trades less risky for you and less risky for the broker by preventing your account from going into negative balance.