Oh, dear reader! Have you heard the latest from our friends at the Canadian Investment Regulatory Organization (CIRO)? They’ve decided to exclude cryptocurrency funds from their list of securities eligible for reduced margin rates. Yes, you read that right! In their infinite wisdom, they’ve cited concerns over volatility, liquidity risks, and regulatory uncertainty. 🤔
On Feb. 5, CIRO released a new List of Securities Eligible for Reduced Margin (LSERM), a quarterly list identifying which securities can enjoy reduced margin rates. Financial institutions that qualify for these reduced rates bask in the glory of improved capital efficiency and lower trading costs. But alas, cryptocurrency funds shall not partake in this feast. 🙁
In their grand proclamation, CIRO declared that cryptocurrency funds will not be eligible for reduced margins “until further notice.” Thus, investors trading in crypto funds must now maintain higher collateral, making it more costly to leverage crypto positions compared to the more mundane stocks or exchange-traded funds (ETFs). Oh, the humanity! 😱
Requirements for securities to be eligible for reduced margin
To be deemed worthy of reduced margin by CIRO, securities must be highly liquid, boast substantial market capitalization, and exhibit lower volatility. Quite the trifecta, wouldn’t you say? 🎯
CIRO’s general inclusion requirements state that securities must have price volatility measures, including a calculated price volatility margin interval of 25% or less. This measure evaluates the security’s price fluctuations over a given period to gauge its volatility. Quite the rollercoaster ride! 🎢
Furthermore, the security must have a market value of at least 2 CA$ per share. This ensures the security maintains a minimum price level, often linked to reduced volatility. It’s like setting a floor for the funhouse, so nobody falls through the cracks. 🏛️
Aside from price volatility, securities must also meet liquidity measure requirements to qualify for reduced margin. This includes a public float value exceeding 100 million CA$ and an average daily trading volume of at least 25,000 daily shares during each month in the preceding quarter. For higher-priced securities, at least 1 million CA$ daily traded value is needed each month. It’s like ensuring there’s enough water in the pool before diving in. 🏊♂️
Lastly, securities must be listed on a Canadian exchange and eligible for margin for six months. For those listed under six months, the security must have a market value greater than 5 CA$ per share, a dollar value of public float greater than 500 million CA$, and be in an industry sector known for low price volatility. It’s like playing a game of “Who’s Who” in the financial world. 🎲
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2025-02-06 13:50