Financial firms stung by last week's surge in the Swiss francare changing client rules and trading practices to weather futurecurrency swings.

FXCM Inc., the New York-based retail broker, said Wednesday it'sincreasing margin requirements for clients who trade currencies andgold after customers' losses forced it to seek a US$300 millionlifeline. CME Group Inc., owner of the Chicago Mercantile Exchange,is altering how it handles volatility in emergencies after it wasbuffeted by trading halts last week.

Some of the world's largest banks incurred losses and struggledto process orders after the Swiss National Bank scrapped a three-year cap on the franc versus the euro on Jan.15, fueling a surge of as much as 41 percent in the nation'scurrency. The turmoil shows regulators need to consider boostingoversight of retail trading platforms such as FXCM, a member of theU.S. Commodity Futures Trading Commission (CFTC) said.

“I am concerned that lower standards are putting this industryin a precarious position and placing retail foreign-exchangeinvestors unnecessarily at risk,” said Commissioner Sharon Bowen, aDemocrat who joined the CFTC last year. That market “is theleast-regulated part of the derivatives industry,” she said.

The National Futures Association (NFA), the U.S. derivativesindustry's self-funded market overseer, temporarily boosted the amount of money traders must put down to backcurrency transactions. The more stringent requirements apply to theSwiss franc, Swedish krona, and Norwegian krone, the group said ina statement. The changes apply to retail trading.

Protecting Clients

FXCM, which was bailed out by Leucadia National Corp., said itsown new global requirements would take effect Wednesday and are“consistent with the firm's most conservative margin requirementscurrently in place” for U.S. customers. The changes will help guardagainst swings tied to the European Central Bank's rate decisionThursday and the upcoming Greek elections, the firm said, without giving details on therules.

“There is a high level of uncertainty in the currency marketsthat could destabilize markets throughout 2015,” FXCM said in astatement. “FXCM's decision to increase margin requirements is inorder to protect clients during extreme market volatility.”

A spokeswoman for FXCM didn't respond to messages seekingcomment on the policy changes.

Leucadia, owner of investment bank Jefferies Group LLC, extendedFXCM a two-year, $300 million senior secured term loan with aninitial coupon of 10 percent, according to a Jan. 16 statement.FXCM climbed 46 percent to $2.33 on Wednesday.

CME, which caters to professional traders and not retailcustomers like FXCM's, said in a statement that its new rules willmake it easier to change limits on price swings during unusualcircumstances. The exchange was forced to alter volatility curbs onan ad-hoc basis Jan. 15 as the Swiss currency's jump prompted threetrading halts for CME futures contracts linked to the franc.

CME's global command center—where trading at the exchange ismonitored in real time—can now modify the price limits or removethem entirely during an emergency, according to the statement. Itcan also decide whether trading of a given futures product shouldbe halted during times of distress.

–With assistance from Jing Cao and Matthew Leising in NewYork.

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