XM changes margin requirement formula for CFDs

XM changes margin requirement formula for CFDs

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The Cyprus and Australia-regulated forex broker XM announced it is changing the margin requirements formula for CFDs. As of August 1, the margin requirement for CFDs will be calculated based on margin percentages rather than on a fixed margin.

Here are the differences between the two formulas:

Old Margin Formula = Lots * Initial Margin
New Margin Formula (as of August 1, 2016) = Lots * Contract Size * Opening Price * Margin Percentage

Here are also a couple of examples provided by XM on how the required margins will change with the new formula:

Example 1 Future Energies – Consider a USD account with 10 Buy (or Sell) lots of NGAS

Lots

Margin Requirement

Opening Price

Margin

Old Formula

10 130 2.65 10 (Lots) *130 (Margin) = 1,300 USD

New Formula

10 3% 2.65 10 (Lots) *1000 (Contract Size) * 2.65 (Opening Price) * 3% (Margin Requirement) = 795 USD

Example 2 Indices Futures – Consider a EUR account with 10 Buy (or Sell) lots of EU50

Lots

Margin Requirement

Opening Price

Margin

Old Formula

10 40 2977 10 (Lots) * 40 (Margin) = 400 EUR

New Formula

10 1% 2977 10 (Lots) * 1 (Contract Size) * 2977 (Opening Price) * 1% (Margin Requirement) = 297.7 EUR

XM urges its clients to ensure their accounts are sufficiently funded and notes that in the cases when the base currency of the account is different than USD,  the calculated margin will automatically be converted to the account base currency at the current market rate.

The new margin requirements will be published in XM’s site, in the section “Commodities” on August 1.

XM is  known for the the 1 Million Dollar Championship it hosts. The broker headquartered in Cyprus, but also has offices in Greece and Hungary. It is regulated by the Cyprus Securities and Exchange Commission and the Australian Securities and Investment Commission and has registrations in UK, Germany, Spain, Finland, Holland, Italy, Hungary, Poland, France and Sweden.

There are three types of accounts: Micro, Standard and Zero. The minimum required deposit on the Standard and Micro accounts is $5 and the maximum leverage on the same two accounts is 1:888. The trading platform is MetaTrader 4 (MT4).

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