Cantor Fitzgerald Increasing Margin Requirements to 20%
August 8, 2007admin No Comments »Cantor Fitzgerald said yesterday it was effectively doubling the amount of money that must be held on deposit when trading FTSE 100 stocks via spread betting or contracts for difference.
The company blamed the current turmoil in global credit markets and volatility in the world’s stock markets. Credit markets were thrown into chaos by the sub-prime mortgage crisis in the US, with the contagion spreading throughout debt markets.
The problems have had a knock-on effect on the world’s stock markets, and a number of flotations have been cancelled.
Spread betting is a leveraged product, meaning punters only have to put down a percentage of the amount they want to trade. That has been increased from 10 to 20 per cent. The move also applies to contracts for difference, another derivative that enables investors to benefit from rises or falls in the price of relatively large packages shares for significantly less than their cost.
The company said: “In light of the current global credit market and the volatility in the global equity markets, Cantor Fitzgerald has raised margin rates applied to its CFD and spread betting products by 10 per cent. The management believe that the company should be prudent and vigilant in its approach to credit and the credit facilities it offers. The change is expected to be temporary and rates will return to usual levels when the current volatility subsides.”
Other spread betting companies said they did not plan to follow suit. John Noble, dealing director at IG, said: “We monitor changes in volatility in stocks and if things go outside our limits, that is when we would act. At the moment we are comfortable.” City Index took a similar stance.
Tags: cantor, Cantor Fitzgerald, Cantor Index, cantorindex, margins, volatility
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