The Canadian Investment Regulatory Organization (CIRO) has declared that cryptocurrency funds will not qualify for reduced margin rates. This decision originates to decrease and cover the volatility, liquidity risks, and regulatory uncertainty.
Yesterday, CIRO has issued its quarterly List of Securities Eligible for Reduced Margin (LSERM). It will identify which securities will be accessible to reduced margin rates and the financial institutions that are liable for these rates benefit from improved capital efficiency and lower trading costs.
CIRO highlighted that cryptocurrency funds will not be allowed to decrease margins “until further notice.” As a result, investors in cryptocurrency funds will need to provide higher security, which will make it costlier to support the crypto positions in contrast to stocks or exchange-traded funds (ETFs).
As per the reports, the funds subjected to higher margin needs are at significant risks of liquidation during market downturns since their decreased margin rates allow for a barrier before liquidation occurs. CIRO has highlighted that securities must have certain factors to be entitled to reduce the margin rates. In particular, the organization that favours highly liquid securities with eco-friendly market capitalization and with less irregularity.
According to CIRO, the Securities must have a calculated price volatility margin interval of 25% or lower, indicating manageable price fluctuations over a specified period.
The entitled securities must have a public float exceeding Canadian Dollars (CA $100 million) and an average daily trading volume in the previous quarter of at least 25,000 shares per month. It further stated that for the higher-priced securities, a minimum daily traded value of CA$ 1 million is required for each month.
Securities must be listed on a Canadian exchange and eligible for margin for at least six months. If listed for less than six months, the security must have a market value exceeding CA$5 per share, and a public float greater than CA$500 million. However, This ruling marks an important stand by the CIRO regarding the regulatory environment surrounding cryptocurrency investments.
