Key Takeaways
- Higher-priced securities must maintain a minimum daily traded value of CA$1 million
- To be eligible, securities must meet specific criteria, including a price volatility margin interval of 25% or less, a public float of at least CA$100 million, and an average daily trading volume of at least 25,000 shares per month in the previous quarter.
The Canadian Investment Regulatory Organization (CIRO) has announced that cryptocurrency funds will not be eligible for reduced margin rates due to concerns about volatility, liquidity risks, and regulatory uncertainty.
This decision, released on February 5 as part of CIRO’s quarterly update to the List of Securities Eligible for Reduced Margin (LSERM), means that investors trading crypto funds must maintain higher collateral compared to those dealing with traditional stocks and exchange-traded funds (ETFs).
CIRO’s LSERM determines which securities qualify for lower margin requirements, allowing selected financial instruments to benefit from improved capital efficiency and reduced trading costs.
To be eligible, securities must meet specific criteria, including a price volatility margin interval of 25% or less, a public float of at least CA$100 million, and an average daily trading volume of at least 25,000 shares per month in the previous quarter.
Higher-priced securities must maintain a minimum daily traded value of CA$1 million. Additionally, securities must be listed on a Canadian exchange for at least six months, or if listed for less than that period, they must have a market price above CA$5 per share and a public float exceeding CA$500 million.
Crypto markets are known for significant price fluctuations, which CIRO has identified as a key factor in excluding crypto funds from reduced margin eligibility. Liquidity risks also contribute to this decision, as many crypto-assets do not consistently meet required trading volume benchmarks.
Regulatory uncertainty remains another concern, with global authorities continuing to assess risks associated with digital assets, including fraud, security vulnerabilities, and compliance challenges.
The decision increases capital requirements for crypto investors, making leveraged trading more expensive. Without reduced margin rates, investors must allocate more collateral to maintain positions, which could limit participation in the crypto market. The higher margin requirements also increase the likelihood of forced liquidations during market downturns if investors are unable to meet collateral demands.
Canada has maintained strict oversight of crypto trading platforms in recent years. Financial regulators, including the Canadian Securities Administrators (CSA) and the Ontario Securities Commission (OSC), have implemented measures to ensure compliance with national securities laws, including registration requirements and anti-money laundering (AML) policies. CIRO has not provided a timeline for when or if crypto funds may become eligible for reduced margin rates.
