Canada’s equities regulator has excluded crypto funds from reduced margin eligibility, citing volatility, liquidity risks and regulatory concerns, making leveraged trading more expensive.
The Canadian Investment Regulatory Organization (CIRO) ruled that cryptocurrency funds will not be eligible for reduced margin rates, citing concerns over volatility, liquidity risks and regulatory uncertainty.
On Feb. 5, CIRO released a new List of Securities Eligible for Reduced Margin (LSERM). This quarterly list identifies which securities are eligible for reduced margin rates. Financial institutions eligible for reduced margin rates benefit from improved capital efficiency and lower trading costs.
In the announcement, CIRO said that cryptocurrency funds are not eligible for reduced margins “until further notice.” As a result, investors trading cryptocurrency funds will need to maintain higher collateral, making it more expensive to leverage crypto positions compared with stocks or exchange-traded funds (ETFs).
Read more,# Canadian Regulator Tightens Leverage on Cryptocurrency Funds
## Key Points from the CIRO Decision
– **Exclusion from Reduced Margin Eligibility:** Canada’s Investment Regulatory Organization (CIRO) has decided that crypto funds will not be eligible for reduced margin rates.
– **Concerns Cited:** The decision was influenced by concerns over the volatility, liquidity risks, and the regulatory uncertainty surrounding cryptocurrencies.
– **Implications for Investors:** This exclusion means that traders will need higher collateral for leveraged trades on crypto funds, resulting in more expensive trading compared to traditional equities like stocks or ETFs.
– **New LSERM List:** The decision was revealed in the latest List of Securities Eligible for Reduced Margin (LSERM) released on February 5, which is updated quarterly to reflect adjustments in eligible securities.
## Closing Insight: A Quirky Finance World
In the land of maple syrup and polite apologies, the world of finance just got a bit tougher on the crypto crowd. The Canadian Investment Regulatory Organization (CIRO) has essentially told crypto funds, “Sorry, but no sorry,” tightening the purse strings on those looking to leverage their way to digital dollar dreams. It’s like showing up to a party and finding out it’s BYOB – Bring Your Own Bankroll! While traditional stocks and ETFs enjoy the reduced margins’ happy hour, crypto funds have to stick with the full-price menu. As they navigate through this pricier trading terrain, one can only hope that these crypto enthusiasts don’t find themselves caught in a financial snowstorm! Looks like in Canada, even the investments are kept on ice!
