Pat: OANDA is a currency trader and has decided to halt currency trading this Sunday given potential “for extreme exchange rate volatility at a time when global currency markets are closed.” The press release continues, “The decision to halt trading is very much tied to the uncertainty in Europe and in particular, the Greek election.” This notice is foremost “intended to inform the investing community of the potential volatility in the coming days and to provide sufficient time to make any necessary adjustments.” What a concept. A currency trader who cares about clients!
June 14, 2012 | OANDA
Reasons Behind Our Sunday Trading Halt
OANDA will halt trading this Sunday, June 17, from 6:00 AM EDT until approximately 3:00 PM EDT. I would like to further explain OANDA’s reasoning for this action.
First off, OANDA is the only forex provider that permits off-market, weekend trading. In truth, volumes during the weekend are much lower than typical trading days, but OANDA has made this available as a service for its clients rather than an opportunity to increase corporate revenues.
The decision to halt trading is very much tied to the uncertainty in Europe and in particular, the Greek election. Given these events, there is the potential for extreme exchange rate volatility at a time when global currency markets are closed. OANDA’s concern is that exchange rates could undergo significant fluctuations as the exit polls are being made public. If these fluctuations are wide enough, accounts that under normal conditions would be considered well-capitalized, could become subject to a margin call.
By halting trading and holding the closing prices steady during this period, we aim to shelter traders from the potential for price spikes. Of course, once trading resumes, new market rates will come into effect and while the hope is that prices will have settled by this time, some accounts may still face the risk of a margin call.
This is why we have issued a warning recommending that traders reduce positions if they determine they are vulnerable from a margin perspective. At the very least, all traders should review their accounts prior to the weekend and ensure they have sufficient capital to prevent a margin call when trading resumes at the new market price.
On a final note, anyone with open positions during this time, regardless of their choice of forex broker, is at risk when exchange rates reset upon the resumption of trading. Yes, sending out this message is to inform our traders of the trading halt, but it is first and foremost intended to inform the investing community of the potential volatility in the coming days and to provide sufficient time to make any necessary adjustments.
Posted by Tonysavor / Jun 14