Understanding Dynamic Margin Requirement

Economic announcements, market close periods, weekends, and public holidays can increase market uncertainty and lead to faster price movements. Dynamic Margin Requirements (DMR) help manage this risk by temporarily increasing the margin required for new trades during these higher-risk periods.

What is DMR?

Dynamic Margin Requirement (DMR) is a temporary increase in margin requirements on all asset classes. It applies when the maximum leverage available to open new trades is reduced under certain market conditions. This helps reduce the likelihood of clients becoming significantly over-leveraged during volatile or low-liquidity periods and may help limit unexpected pressure on your accounts.

DMR applies to new market orders, triggered pending orders, and any new exposure resulting from unlocking hedged position during a DMR period. Positions opened before a DMR period remain unchanged.

DMR may apply during the periods below and may be extended or amended by us where required. Once the higher-risk period has passed, leverage and margin requirements automatically return to their normal levels.

 When does DMR apply?

DMR occurs during the following periods throughout the trading week:

•  Major/high-impact news releases

Maximum leverage is capped at 1:200 for instruments affected by a high-impact news release, starting 12 minutes before the release and ending 2 minutes after it.

High-impact news releases include events such as Non-Farm Payrolls (NFP), CPI figures, and central bank interest rate decisions, among others.

•  Daily Break for Spot Metals and Oil (Monday to Thursday)

To manage risk around the daily trading break, DMR is applied during the final hour before the end of the trading session for the affected instrument.

During this period, maximum leverage is capped at:

⦁      1:200 for Spot Metals

⦁      1:100 for Crude Oil and Brent (WTI and BRN)

For example, if the trading session for Brent closes at 23:45 server time, DMR will apply from 22:45 server time until the end of the session.

•   Friday market close

DMR applies during the 3-hour period before each instrument’s individual Friday session close. During this period, leverage is capped at:

⦁      1:100 for Crude Oil and Brent (WTI and BRN)

⦁      1:100 for Spot Metals

⦁      1:200 for all other instruments

•   Public holidays

Where Friday is a market holiday, the Friday market close DMR period is instead applied on Thursday, with the same time windows and leverage caps that would normally apply on Friday being implemented on that day.

How DMR affects trading

Positions opened before DMR periods remain unchanged.

Trades opened during a DMR period are subject to the applicable DMR leverage cap. This means the margin required to open a new trade will be higher than during normal market conditions.

Once the DMR period ends, margin requirements are automatically recalculated based on the account’s equity and applicable leverage. No action is required from the client.

If a hedged position is partially or fully unlocked during a DMR period, any new net exposure created is treated as a new position. This new exposure will be subject to the DMR leverage in place at that time, rather than the leverage that applied when the original position was opened.

 Important notes

·      Before trading into a Friday close, it is important to check the specific close time for the relevant symbol, as this may vary. Close times can be found in the contract specifications https://alpari.com/en/trading-terms/fees/contract-specifications/ section of the Alpari website or within the instrument’s information/specifications tab on the trading platform.

·      The Alpari Economic Calendar https://alpari.com/en/economic-calendar/ provides an easy way to track forthcoming high-impact news releases and plan positions around DMR periods.

·      DMR conditions may be updated from time to time without prior written notice.

 DMR Examples

Example 1 - DMR during news release (EUR/USD)

Non-Farm Payrolls (NFP) data release is scheduled for 13:30 UTC. Client opens a trade on EURUSD 2 lots (where maximum leverage is 3000) at 13:21 UTC.

According to DMR rules, between 13:18:00 and 13:32:00 (DMR period), any new exposures opened on Forex Majors will have a margin held at a DMR leverage of 1:200.

Hence, the required margin for the EURUSD 2 lot trade is:

Required margin (DMR) = 2 × 100,000 EUR / 200 = 1,000 EUR

This is instead of 66.67 EUR (if there were no news releases or other DMR cases).

At 13:32 UTC, the margin requirement for the order is automatically recalculated and reduced from EUR 1,000 to EUR 66.67

 Example 2 - DMR during daily rollover (Gold)

For Spot Metals, the daily trading break starts at 23:55 and ends at 01:05 server time, Monday to Thursday.

DMR applies during the 1-hour period before the daily trading break, from 22:55 to 23:55 server time. During this period, any new exposure opened on Spot Metals is subject to a maximum leverage of 1:200.

A client opens a 3-lot XAUUSD position at 23:20 server time on Wednesday. The maximum leverage available on the instrument is 1:3000, and the current Gold price is 4,500 USD.

Since the position is opened during the DMR period, the DMR leverage of 1:200 applies.

Required margin under DMR:

3 × 100 × 4,500 / 200 = 6,750 USD

Without DMR, the required margin would be:

3 × 100 × 4,500 / 3000 = 450 USD

Therefore, during the DMR period, the required margin for this position is 6,750 USD instead of 450 USD.

At 01:05 server time, once the daily trading break ends, the margin for this position is automatically recalculated and reduced from 6,750 USD to 450 USD

Example 3 - DMR during weekend (UK100)

For UK100, the market closes at 23:59 server time on Friday and reopens at 01:00 server time on Monday.

DMR applies during the 3-hour period before the Friday market close, from 20:59 to 23:59 server time. Any new exposure opened during this period is subject to a maximum leverage of 1:200. The DMR margin requirement remains in effect throughout the weekend and until the market reopens.

A client opens a 10-lot UK100 position at 21:30 server time on Friday. The maximum leverage available on the instrument is 1:500, the UK100 contract size is 1, and the current UK100 price is 8,300 GBP.

Since the position is opened during the DMR period, the DMR leverage of 1:200 applies.

Required margin under DMR:

10 × 1 × 8,300 / 200 = 415 GBP

Without DMR, the required margin would be:

10 × 1 × 8,300 / 500 = 166 GBP

Therefore, during the DMR period, the required margin for this position is 415 GBP instead of 166 GBP.

The DMR margin requirement remains in place throughout the weekend. At 01:00 server time on Monday, when the UK100 market reopens, the margin for this position is automatically recalculated and reduced from 415 GBP to 166 GBP

 

Example 4 - DMR for hedged positions

The client has a fully hedged position: 1 lot buy EURUSD and 1 lot sell EURUSD.

As the position is fully hedged and hedged margin is 0%, the margin requirement for these orders is zero.

The Non-Farm Payrolls release is scheduled for 13:30. DMR applies from 13:18 to 13:32. During this period, any new exposure opened on Forex Majors is subject to a maximum leverage of 1:200.

At 13:29, the client closes the 1-lot sell EURUSD position. As a result, their net exposure increases from 0 to 1 lot EURUSD.

Although the original positions were opened before the DMR period, new exposure is created during the DMR period because the client unhedges the locked positions. Therefore, margin for the new exposure is recalculated using the DMR leverage.

Required margin under DMR:

1 × 100,000 EUR / 200 = 500 EUR

Without DMR, the required margin would be:

1 × 100,000 EUR / 3000 = 33.33 EUR

Therefore, during the DMR period, the required margin for this exposure is 500 EUR instead of 33.33 EUR.

At 13:32, once the DMR period ends, the margin for the open position is automatically recalculated using the default margin settings and reduced from 500 EUR to 33.33 EUR