Do not invest more money than you can afford to lose.
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).
