It Begins: FXCM Doubles Yuan Margins, Warns Of Market "Disruption And Highly Illiquid Conditions"

Tyler Durden's picture




 

The last time FX brokers, still hurting from the Swiss National Bank's revaluation shocker from last January which forced brand names such as FXCM to seek an urgent bailout, scramble to hike margins was in late June just ahead of the Greek "event risk" weekend, when  numerous brokers either hiked margins on EUR positions or went to "close only" mode due to "uncertainty surrounding the Greek debt negotiations... that could lead to high volatility on the market."

So, barely one week into the new year, one which has seen the stock market suffer its worst ever first week of trading, some FX brokers are not taking chances, and in the aftermath of the aggressive plunge in the Yuan (one we warned about a month ago), have decided to minimize client stop-out risk by hiking margins.

Case in point, here is FXCM with a just released warning about upcoming "highly illiquid conditions" leading to a doubling in Yuan margins:

Dear Client,

 

We believe there is a chance of disruption and highly illiquid conditions in the forex market during the coming weeks (and/or months). Please be aware that market gaps tend to occur over the weekend – that is, currencies trade at prices considerably distant from previous levels.

 

*IMPORTANT UPDATE*  

 

Margin requirements will double on the USD/CNH pair after market close on January 15, 2016. See a Complete List of New Margin Requirements

 

Please review your account to ensure that you have enough available margin to support any new positions. You may deposit additional funds at www.myfxcm.com or close positions as needed.

Follows the traditional disclaime which FXCM itself probably should have taken to heart one year ago when after the SNB's de-pegging the firm suffered tremendous losses:

Remember that forex trading can result in losses that could exceed your deposited funds and therefore may not be suitable for everyone, so please ensure that you fully understand the high level of risk involved.

The paradox here is that pre-emptive, if correct, warnings such as this one, tend to quickly become self-fulfilling prophecies as other brokers immediately follow suit and likewise increase margin requirements, which helps mitigate total loss potential but just as quickly soaks up liquidity from the market, leading to an even more fragmented market, prone to sudden, and quite dramatic moves.

The full list of FXCM margin increases is shown below; expect every other FX brokerage to promptly jump on the bandwagon.

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Sat, 01/09/2016 - 15:04 | 7022427 Yen Cross
Yen Cross's picture

 Minimize client stop out risk... lmfao

 It's more like the casino is trying to cover it's ass in the event the usd/cny goes bidless.

Sat, 01/09/2016 - 15:15 | 7022471 Kayman
Kayman's picture

But, but, but... China has a pile of foreign reserves... Had ?

"Hello, hello, Ming, is that you ?  You know that house you bought in L.A. for cash ?  Well your country would appreciate you returning that back to the till.  If not, we need your forwarding address to send the invoice for the bullets.. Yea, that's right, we have your children right here."

Sat, 01/09/2016 - 15:42 | 7022570 robertocarlos
robertocarlos's picture

Please make that happen before Vancouver becomes 80% Chinese.

Sat, 01/09/2016 - 16:28 | 7022602 Arnold
Arnold's picture

Wee hep yu, chop,chop!

 

https://en.wikipedia.org/wiki/Hop_Sing

Sat, 01/09/2016 - 16:14 | 7022672 Sages wife
Sages wife's picture

Epic loss of face.

Sat, 01/09/2016 - 20:36 | 7023577 Kayman
Kayman's picture

Visited my daughter in Vancouver in November- did the other 20% leave ?

Sun, 01/10/2016 - 18:59 | 7026745 Fish Gone Bad
Fish Gone Bad's picture

Like ridin' the bus through China Town in SF eh?

Sat, 01/09/2016 - 16:03 | 7022636 Winston Churchill
Winston Churchill's picture

The peg to the USD is killing exports.Another sign of the loss of GRC,their markets outside

the US are now more important to themThey are making no secret of their desire for a 15% devaluation,

they thought they could do it slowly, now they just need to rip off the bandaid.

Get er done.

Could happen at any time.If you think the swissie was a shock,just wait.

Sat, 01/09/2016 - 16:16 | 7022676 Arnold
Sat, 01/09/2016 - 20:38 | 7023585 Kayman
Kayman's picture

You think they can stop it at 15%?  Good Luck with that.  

Sat, 01/09/2016 - 15:07 | 7022432 Arnold
Arnold's picture

I want My Margin Call.................

 

https://www.youtube.com/watch?v=lAD6Obi7Cag

http://www.metrolyrics.com/money-for-nothing-lyrics-dire-straits.html

 

Dire Straits wrote the lyric and music ....perfect.

Sat, 01/09/2016 - 15:24 | 7022503 Consuelo
Consuelo's picture

 

 

'The little FAGGOT with the earing & the make-up, yeah buddy, that's his own hair...   The little FAGGOT got his own jet airplane, the little FAGGOT he's a $millionaire...'

 

Imagine that...   That song actually aired in it's entirety for quite a while before it go PC'd out... 

Sat, 01/09/2016 - 15:43 | 7022524 Arnold
Arnold's picture

Thanks, they put it out of the lyrics I pulled up.Ald

Your Bonus.

 

http://www.davemcnally.com/lyrics/direstraits/brothersinarms/

Sat, 01/09/2016 - 15:11 | 7022446 SILVERGEDDON
SILVERGEDDON's picture

Don't worry, the chicks for free part is coming down the pipeline soon too.

Free protein shakes for room and board.

Same as it ever was, minus the wedding ring and legal complications.

Sat, 01/09/2016 - 15:13 | 7022461 LawsofPhysics
Sat, 01/09/2016 - 15:22 | 7022493 bilbert
bilbert's picture

Nope - thanks for the catch, LP!

Nothing at all strange about that...............

Sat, 01/09/2016 - 15:28 | 7022516 Consuelo
Consuelo's picture

Oh my...

 

Sounds like the good commander might have gotten a bit to uppity for comfort, no...?

Sat, 01/09/2016 - 16:00 | 7022623 Arnold
Arnold's picture

Sad if true.

Sat, 01/09/2016 - 16:23 | 7022649 TeaClipper
TeaClipper's picture

You do realise that article is dated Dec 2012, dont you?

Sat, 01/09/2016 - 17:08 | 7022829 besnook
besnook's picture

not in any way detracting from his service but soldiers always seem to forget they are government issued(gi) expendable equipment.

theirs not to reason why. theirs but to do and die.

god bless all of them for they know not what they do.....and for whom they do it for.

Sat, 01/09/2016 - 15:21 | 7022492 Sequoia
Sequoia's picture

Market dislocations in the mirror are closer and larger than they appear!

Sat, 01/09/2016 - 15:30 | 7022523 ebworthen
ebworthen's picture

Why not double the margins come Monday morning?  Why wait until Friday?

Trying to shake out some hands?

Sat, 01/09/2016 - 15:34 | 7022537 Arnold
Arnold's picture

The Federal Reserve always tries to project it's next move.

Ha, fuckhead Hilsenrath.

Everyone else, not so much.

Sat, 01/09/2016 - 15:41 | 7022565 buzzsaw99
buzzsaw99's picture

Nicky's methods of betting weren't scientific, but they worked. When he won, he collected. When he lost, he told the bookies to go fuck themselves... [/Ace Rothstein]

Sat, 01/09/2016 - 16:05 | 7022639 carbonmutant
carbonmutant's picture

So much for the fantasies of a Reserve currency...

Sat, 01/09/2016 - 16:11 | 7022658 Kaiser Sousa
Kaiser Sousa's picture

"everybody remain calm...."

suckers.

Sat, 01/09/2016 - 16:12 | 7022661 Big Brother
Big Brother's picture

*User of FXCM here:

A year ago on the money, January 15th, the SNB opted to depeg from the Euro.  They did so during normal business hours.  A lot of retail traders had positions too large to absorb that kind of move.  FXCM had to be bailed out by a British Hedge Fund.  I assume they're trying to avoid a repeat of such an event.  Evidently, risk of ruin does not only apply to the speculator, but also the house.

I plan on getting exposure to this pair given the fat-tail of upside potential.  6.5250 looks like a good entry point.  2016 will be a good year for patient, trend-following currency traders.

Sat, 01/09/2016 - 16:34 | 7022725 BiPolarFrenchman
BiPolarFrenchman's picture

Who's FXCM's prime broker for FX liquidity? They're the ones really putting out the margin reduction.

Sat, 01/09/2016 - 16:39 | 7022743 U4 eee aaa
U4 eee aaa's picture

Double margins? I thought they only did that to the gold market? You know they are desperate when currencies start getting the same disrespect the gold market gets (but for opposite reasons)

Sat, 01/09/2016 - 16:42 | 7022753 franzpick
franzpick's picture

Counting the hours to tomorrow's futures open 6pm ET: 26:24. My screens show chart disasters across the board:

http://www.investing.com/indices/indices-futures

http://finviz.com/futures_charts.ashx?t=INDICES&p=m1

 

Sun, 01/10/2016 - 19:07 | 7026769 Fish Gone Bad
Fish Gone Bad's picture

Christmas in January.

Sat, 01/09/2016 - 16:52 | 7022777 besnook
besnook's picture

so they will cereate their own front run on the market? there is plenty of liquidity. that is not the problem. the problem is the liquidity is going to be drained from the wrong people. i just might be able to retire(i won't.lol) on my amzn short alone.

Sat, 01/09/2016 - 17:16 | 7022858 Yen Cross
Yen Cross's picture

FXCM is a bucket shop financed by levered investors, too see the order books off of EBS, and trade against the retail market.

Sat, 01/09/2016 - 19:07 | 7023271 - - - - - -
- - - - - -'s picture

 

 

they are still 300 million in the minus   

the original owners were 5 jews and a non jew. i dont know how much of their share they have lost on the swiss jump but fxcm is now trying hard to pay back the 300 millions and is robbing its clients with agressive tricks. i heared they do no longer accept small traders(<- dont know if its true) and concetrate on scamming the bigger ones. 

Sat, 01/09/2016 - 21:55 | 7023823 Yen Cross
Yen Cross's picture

FXCM is an "write off".

Sun, 01/10/2016 - 11:44 | 7025061 The Greek horse
The Greek horse's picture

OK Mr. 6 days in ZH you know nothing but seems you gotten burned in the FX market.. What does Jews have to do with being the original owners have anything to do with FXCM ? maybe you anti Semite and somebody who got a margin call in the FX market.. The SWISS BANK screwed FXCM not the other way around.. ANYway keep investing in the FX market we need suckers like you!! Lol newbies in Zerohedge there are funny sometimes..

Sat, 01/09/2016 - 22:54 | 7023984 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

oanda is too..isn't it..? 

Sun, 01/10/2016 - 01:00 | 7024349 - - - - - -
- - - - - -'s picture

obviously

Sat, 01/09/2016 - 17:22 | 7022880 Buster Cherry
Buster Cherry's picture

It Begins: another article that starts with the words: "It Begins"

How about: "It Begins: Mob of angry citizens stop Presidential motorcade, pulling the Chief Executive out and ripping her to shreds."

Sat, 01/09/2016 - 20:10 | 7023477 Quinvarius
Quinvarius's picture

Gotta get that last little tail in just before the Fed competes by going full retard in USD devaluation...which they have no choice but to do.

Sat, 01/09/2016 - 21:16 | 7023705 Omega_Man
Omega_Man's picture

doubling the margin requirements ? seems like they are creating the problem they warn of....

Sat, 01/09/2016 - 22:01 | 7023840 Iam_Silverman
Iam_Silverman's picture

Oh, lack of liquidity in the FX markets?  Hey, why dontcha' call the Equity Boys and borrow some High Frequency Trade bots?  I hear they add lots of liquidity to the market!

Sat, 01/09/2016 - 22:24 | 7023899 Deep_Out-of-the...
Deep_Out-of-the-Money's picture

Time and time again, people always fight the previous war. Quite ironic that the date FXCM are hiking the margins is the anniversary of the swissie de-peg that blew them up.

Sat, 01/09/2016 - 22:45 | 7023963 The Greek horse
The Greek horse's picture

FXCM USER and Professional Forex trader here.. Who gives a shit about the yuan it's spreads are ridiculous to begin with, you have other currencies to trade accordingly EUR/USD GPB/USD EUR/JPY and AUD/USD to name a few with great spreads... FXCM is one of the best Platforms and clientele friendly..Volatility is were fortunes are made and losers get margin calls...    

Sat, 01/09/2016 - 22:59 | 7023998 DipshitMiddleCl...
DipshitMiddleClassWhiteKid's picture

i dont think pro traders use retail bucket shops like FXCM...

Sun, 01/10/2016 - 03:13 | 7024469 The Greek horse
The Greek horse's picture

I am the 5 percent who is making $ in the Forex market FXCM is just a platform maybe you are in stocks were it's 100% rigged and sheeps get slaughterd... The Forex market is for sharks.. FXCM and Trade station are just trading platforms to name a few.. Plus I have a geopolitical outlook with a REAL EDUCATION in the FXmarket.. Most of you morons seem like the 95 percent on this particular commentary!  

Sun, 01/10/2016 - 03:39 | 7024497 - - - - - -
- - - - - -'s picture

 

 

im in the 5% too 

now we entered the bragging mode

woooooo~~~  real education, even in big captures

the fx market is rigged too so shut up before a mushroom grows out of your mouth

 

"FXCM USER and Professional Forex trader here"

yeah nice try promoting your trash company on zh worth -300 milliions

Sun, 01/10/2016 - 05:34 | 7024574 Aussiekiwi
Aussiekiwi's picture

Slaughtered him, brilliant!

Sun, 01/10/2016 - 11:13 | 7024963 The Greek horse
The Greek horse's picture

OK 6 days ZH newbie besides my self I met some of the best FOREX instructors in the world at ON LINE TRADING ACADEMY.. yeah real education we need people like you and the rest of you retail suckersl  to provide money in the market BUT it's the banks that move it. The Forex market is not 100 percent rigged... Plus you seem to be from Australia or NEw Zealand what is your leverage probably 500/1 NYC is 50/1 so go fuck a kangaroo goon.. I show you my statements but you seem to me like a 6 days wining baby nice try but epic fail ZH IS FOR CRITICAL thinkers not FAGS LIKE you..THX for providing equity in the market!!!   

Sun, 01/10/2016 - 22:39 | 7027757 Big Brother
Big Brother's picture

I can also attest that the FX market is not rigged.  I used to run FX Solutions and FXCM's platform simultaneously and the quotes and spreads were nearly identitical.  There may have been a little bit of difference in spread for the 30 seconds after an FOMC meeting due to the insane amount of order flow.

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