EU and Australia-regulated forex brokerage XM said on Wednesday it will temporarily increase the margin requirement for certain Turkish lira (TRY) pairs in relation to the upcomming constitutional referendum in Turkey. The broker will set the margin on USD/TRY and EUR/TRY to 5%.
The new margins will apply on both new and existing positions.
“To protect the Company and our clients from the anticipated market turbulence, XM intends to temporarily increase margin requirements to 5% (leverage 20:1) for USD/TRY and EUR/TRY on Friday 14th of April at 13:00 server time (GMT +3),” the broker said in a notice.
Ttrading conditions will be resumed back to their normal values shortly after the opening of the market and the announcement of the referendum results, the broker noted.
Turkey will hold a referendum on 16 April, 2017, on whether the country should remain a parliamentary democracy or adopt a presidential system. Experts point the outcome of the referendum could lead to the most significant development in the Turkish politics since it was declared a republic.
It is expected that the referendum will cause “extreme market volatility, thin market liquidity, abnormal spreads and price gaps in Turkish Lira (‘TRY’) pairs,” as XM put it in the statement.
More brokers are expected to follow and alter their trading conditions as the date gets closer. However, Turkey-based brokers are not going to take any action, as the maximum leverage they offer is already low. By law, the maximum margin rate Turkish brokers are allowed to offer retail traders is set at 10:1.
XM, formerly known as XEMarkets, is a trading brand of Trading Point Holdings. The broker is licensed by the Cyprus Securities and Exchange Commission (CySEC), the UK Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC). It is also awaiting licensing from the Financial Services Board (FSB) of South Africa.