YEREVAN (CoinChapter.com) — The Canadian Investment Regulatory Organization (CIRO) has ruled that cryptocurrency funds will not qualify for reduced margin rates, citing concerns about volatility, liquidity risks, and regulatory uncertainty. This decision increases collateral requirements for crypto investors, making leveraged trading more expensive compared to stocks and exchange-traded funds (ETFs).
On Feb. 5, CIRO released its quarterly List of Securities Eligible for Reduced Margin (LSERM), which identifies financial instruments that meet its margin reduction criteria. While highly liquid assets with stable market capitalization benefit from reduced margin rates, crypto funds remain excluded. The regulator stated that cryptocurrency funds will remain ineligible “until further notice,” requiring traders to post higher collateral to open and maintain positions.
Reduced Margin List CIRO. Source: CIROThis policy directly impacts investors using margin trading for crypto funds, increasing the cost of maintaining leverage. When margin requirements rise, traders have less flexibility, making it harder to manage market fluctuations. Higher collateral thresholds also increase the risk of forced liquidations during price declines, as reduced margin eligibility typically allows traders more time before liquidations occur.
CIRO’s Requirements Keep Crypto Funds Out
CIRO assesses securities based on liquidity, volatility, and market capitalization to determine reduced margin eligibility. Securities must demonstrate low price volatility, with a calculated volatility margin interval of 25% or less. Crypto funds often exceed this limit, making them ineligible under current rules.
Another requirement for reduced margin eligibility is a minimum market value of 2 CA$ per share. This standard ensures that assets maintain a stable price floor, a measure used to filter out high-risk instruments. In addition to price stability, CIRO requires a public float value of at least 100 million CA$ and an average daily trading volume of at least 25,000 shares over the past three months. For higher-priced securities, the trading volume must exceed 1 million CA$ per month.
CIRO also enforces listing conditions. A security must be listed on a Canadian exchange for at least six months to qualify for reduced margin rates. If listed for a shorter period, it must have a market value exceeding 5 CA$ per share and a public float greater than 500 million CA$, and it must operate in a low-volatility sector.
Crypto Margin Ineligibility. Source: CIROHigher Costs for Crypto Traders Without Reduced Margin Rates
The exclusion of crypto funds from reduced margin eligibility has significant implications for investors. Without lower margin rates, traders must maintain higher collateral, making leveraged positions more expensive. During market downturns, this increases the likelihood of forced liquidations, as traders lack the buffer that reduced margin rates provide.
Stocks and ETFs continue to benefit from reduced margin eligibility, making them more cost-effective for margin trading. Crypto investors, however, face additional financial hurdles, limiting their ability to engage in leveraged trading under the same conditions as traditional financial assets.
While CIRO updates its margin eligibility list quarterly, the regulator has not indicated any timeline for reconsidering crypto funds. Until further updates, traders will need to factor in higher margin requirements when engaging in crypto trading in Canada.
The post Canada’s Regulator CIRO Blocks Crypto Funds From Lower Margin Trading first appeared on Coinchapter.
The post Canada’s Regulator CIRO Blocks Crypto Funds From Lower Margin Trading appeared first on Coinchapter.
