Changes to Margin Requirements Ahead of OPEC Meeting
On March 30, WTI crude oil hit at 17-year low at $19.02 a barrel. With the market being so uncertain, Russia and Saudi Arabia are debating cutting global oil supply by 10 million barrels a day to prevent further price falls amid the coronavirus pandemic.
Saudi Arabia has also called for an emergency meeting of OPEC (the Organization of the Petroleum Exporting Countries), as well as Russia and other non-OPEC producers, to reach a fair agreement to stabilise oil markets. The meeting will occur on April 6, 2020, via video conference.
In response to the market uncertainty created by this situation, we will be making temporary changes to our trading terms for Professional clients.
Retail clients who trade with leverage rates of 1:10 or lower are not subject to these changes and will still remain covered with unconditional negative account balance protection. However, it is important for all clients to exercise caution during extraordinary market events. We provide some tips on how to manage risk later on in this article.
Changes for Professional Clients
Starting from Saturday, April 4th 2020 and until further notice, we will reduce the maximum possible leverage available to Professional clients on selected CFD instruments as follows:
- WTI Crude Oil Spot
- Crude Oil West Texas Futures
- Brent Crude Oil Spot
- Brent Crude Oil Futures
For notional position values up to 500,000 EUR (or USD, or CHF or equivalent in another currency) the maximum possible leverage will be 1:50.
For notional position values in excess of the above mentioned 500,000 EUR, the leverage will be 1:10
Amended margin requirements will apply to all open and new positions in the aforementioned instruments and will affect the amount of your current margin collateral. Please be advised to carefully check your account status.
Note that even though the maximum leverage will be updated in our systems on Saturday, April 4, the change itself will not be executed in client accounts until the markets open on April 6. Therefore, clients who wish to keep existing positions open and avoid a liquidation of open positions (stop out) can do so by transferring sufficient funds to their trading account via instant payment options (e.g. credit card payments).
Exceptions to Changes in Trading Terms
At the same time, we reserve the right to make further changes to trading terms depending on the market situation.
Considering the probability that the emergency OPEC meeting will trigger abnormal market conditions and/or exceptional market movements, we remind our Professional Clients that our negative account balance protection policy does not apply in abnormal market conditions.
How to manage risk during extreme market volatility
We recommend that both Retail and Professional clients review their exposure in all affected instruments and, prior to the upcoming event, adjust it to acceptable risk levels if required.
Please be aware of other increased risks within the period leading up to and following the OPEC meeting, among all other risk factors:
- Sharp moves and significant gaps in market prices, especially in oil prices
- Limited liquidity, which may result in significantly wider spreads, and an increased amount of order rejections and slippage
- Significantly higher overnight fees ('Swaps')
With this in mind, it is a good idea to check all open positions and ensure they have appropriate stop losses in place. You can edit the stop loss level at any time for FREE in our trading tools.
Also consider whether you would like to close some positions, full or partial, or deposit new trading capital to your trading account, to create a higher buffer for potential volatility.
Frequently check the details of the affected instruments in the Contracts Specification section on our website because, in stressed market conditions, applicable Swap debits and credits as well as supported trade sizes and trading session times may be subject to changes without special notice to you.
Finally, remember that stop loss orders are a tool intended to automate your position exit routine - they are not a guarantee of a certain position exit price, and clients should still be aware of the high risk of gaps in market prices during volatile periods. Learn more about your risk management options here.