Thursday, April 19, 2012
Options Regulatory Alert #2012 - 5
PHLX Announces Margin Levels for Select Currency Options
What you need to know:
What has been announced?
Margin levels will be adjusted to the percentages in the table below for select foreign currency options, also known as PHLX WCOs.
Margins applicable to foreign currency options are set quarterly by PHLX.
As a reminder, WCOs will be transitioning to PHLX FOREX Options on Monday, June 18, 2012. For more information, refer to the PHLX FOREX Options Fact Sheet.
How are margin levels calculated?
Per Rule 721-Margin Accounts, PHLX calculates a separate margin requirement for each foreign currency individually across the various currencies.
PHLX determines the applicable margin percentage by reviewing, on a quarterly basis, five-day price changes comparing the base currency against the underlying currency over the preceding three-year period for each foreign currency pair underlying options traded on PHLX.
The minimum margin requirement will be set at a level that would have covered price movements over the review period at least 97.5% of the time (confidence level).
If the results of subsequent reviews show that the confidence level for any currency pair has fallen below 97%, PHLX will increase the margin requirement for that currency up to a 98% confidence level, and increase the monitoring of such currency pair.
PHLX will also review each currency pair for large price movements outside the margin level (extreme outlier test). In instances where there is a percentage price movement - positive or negative - that exceeds two times the current margin level, the margin requirement for that currency will be set at a level that would cover 99% of all price movements.
What are the margin levels?
|Foreign Currency||Current Percentage||New Percentage|
|New Zealand Dollar||6.5%||5.0%|
Where can I find additional information?
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