The U.S. derivatives industry’s frontline regulator increased the amount of money traders must put down to back currency transactions after a surge in the Swiss franc left a leading broker in need of a US$300 million rescue.
The National Futures Association (NFA), an industry-funded overseer of the market, set more stringent requirements for trading in the Swiss franc, Swedish krona, and Norwegian krone, the group said in a statement released Wednesday. The changes apply to retail currency trading.
Clients of FXCM Inc., the largest retail currency broker, suffered big losses last week after the Swiss National Bank let the franc float freely against the euro. The franc surged as much as 41 percent. FXCM warned that client losses threatened the broker’s compliance with capital rules.
The NFA has said it is reviewing oversight of retail currency trading to ensure rules governing leverage in the market adequately protect customers. Sharon Bowen, a member of the Commodity Futures Trading Commission, said Wednesday that her agency should review its oversight of the market and consider tightening regulations.