(Changes headline and first paragraph to make clear IG is a
platform for trading a range of products, not just currencies)
By Patrick Graham
LONDON, March 5 Financial trading platform IG
Group, following losses from the Swiss franc's 40
percent surge on Jan. 15, has slashed the credit it extends to
clients on currency trades, according to emails sent to clients.
IG has increased the amount clients must put up against
trades from between 1 to 3 percent of the value of the trade to
up to 30 percent for large amounts. It also is telling clients
to hold more margin on positions where they have set a "stop
loss", a standing order to close the position.
IG says this is to guard against situations where the market
moves too fast for the company to find a buyer for such orders,
a situation known as slippage.
"The Slippage Margin is an additional amount to protect you
should the market gap through your stop loss," IG said in an
email sent to a client, who declined to be identified because of
ongoing discussions with the company. IG confirmed it was an
email from the company to clients.
"As of 7 March, we're changing the slippage factor we apply,
which may result in the margin requirement for positions with
non-guaranteed stops increasing."
Representatives of a group of IG clients resisting payment
of losses incurred on the franc trade said that the changes
showed IG was acknowledging it had been wrong about the risks of
its platform not being able to close positions quickly enough if
the franc ceiling were removed.
The margin increases apply to a number of pegged or
otherwise controlled currencies, including the Danish and Czech
crowns, Hong Kong dollar and the franc, as well as a wide range
of emerging-market currencies.
The highest margin on the franc is now 30 percent, or
leverage of just over 3 times. It had been 3 percent before Jan.
15. Smaller franc trades carry margins of 5 percent, up from 1
percent, or 100 times leverage.
"With such huge margin hikes, IG are now admitting they were
completely wrong about their risk of platform slippage and its
impact on customers," one member of the group said in a joint
letter to Britain's Financial Conduct Authority.
"The margins under the new regime would have been more than
my entire net worth -- none of us could possibly have put on the
same trades today."
IG's disgruntled customers, among other things, argue that
the company misled them about the performance of the platform
and what they could expect from their stop losses.
"Why are IG making such dramatic changes now? Because they
can see they were completely wrong about their ability to trade
out of our risk in a volatile market," the client group said in
the same letter. "And yet they still expect us to pay for their
A spokesman for IG declined to comment on the content of
that letter. The company says that its systems operated as
planned and that any losses were the result of a disorderly
market in which it made its best efforts to execute client
IG said in late January it faced a bill of up to 30 million
pounds because of the franc's unprecedented surge. That broke
down to 12 million pounds of market exposure and 18 million
pounds of client exposure.
It later said it was seeking payment "as promptly as
possible" from a group of 327 clients who had debts worth more
than 17 million pounds. Its stock price has fallen 1.1 percent
since the open on Jan. 15, against a rise of 8 percent in the
(Editing by Larry King)