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Screenshot of a breaking news alert e-mail from Q2 2017
An article by the Nikkei Asian Review today stated that Japan’s Financial Services Agency (FSA) plans to start setting the maximum amount of leverage corporate investors can use in FX margin trading. No specific leverage total was specified in the piece and is still being debated according to the article.
To mitigate risks in the market, where positions leveraged to the tune of 500:1 were common, the financial regulator imposed a 50:1 cap on retail investors in 2010, then further lowered the limit to 25:1 the following year. But small businesses and other corporate investors were exempt.
The FSA hopes to put the new rules in place starting in 2017 by amending relevant legislation. However, corporate accounts are likely to see different leverage limits for trade between different currencies, such as between the USD/JPY or between the EUR/USD, based on past market data.
Currently in Japan, investors face a leverage cap of 25:1. This means that individuals can trade up to $250,000 worth of positions with a deposit of $10,000. The impetus for this move likely stems from when the Swiss franc spiked by 30% against the euro in January 2015, some corporate investors ended up with losses larger than their deposits.
To see the whole article click here.