Sept 2022 News letter: "Margin Update for Major Events & New Announcements"

[Robotman]

Beginning Friday, October 7th, day trading margins will be increased to initial exchange margin prior to the release of key economic news announcements for any and/or all products. The temporary elevated margin requirements will remain in place until market volatility is determined to present manageable risk for our traders.

What are these "key economic news announcements"? What if we are not aware of a "key economic news announcement" and we get stung with a margin violation?
Are we to now have the "Order Desk Updates" web page open and constantly refreshing to see if NT Brokerage has randomly increased margins?
Will NT Brokerage issue a pop-up and sound alert when it increases to initial exchange margin? Why not?
Why not a full time alert in Control Center indicating the information contained on the "Order Desk Updates" web page? Maybe red or green text in a little box next to the green circle.

Why are "risk templates" only available in SIM accounts? Does the Brokerage really need to make money on inadvertent margin violations?
Why not have 2 risk templates assigned to a live account? One for standard trading conditions and one for high volatility that automatically switches when the brokerage randomly issues their change?

Minimally, I think if NT Brokerage is going to randomly increase/decrease margins, it should incorporate a pop-up, sound alert and a Control Center warning.

Thanks,
Robotman

[NinjaTrader_Sev]

Hello Robotman,

Thank you for the inquiry.

On October 7th the CES (Current Employment Statistics) report is being released, which qualifies as Key Economic News.

The changes to margins for major events will be applicable to many historically important announcements, such as monthly employment data, FOMC meeting announcements, and more recently, CPI announcements. It’s difficult to list which announcements will have margins updates since the relative importance of those announcements changes. Several months ago the CPI release was a non-event to the market, but as inflation has become a focal point it has become the largest market moving event each month.

With this in mind, our Order Desk monitors volatility around various events and makes updates to margins when necessary to protect our traders. The intent is to have margins returned to standard intraday rates as soon as possible, but not until conditions are viable for trading with lower requirements. Again, these changes apply only to select markets, and not all products will have their margins increased.

For the most recent status on Margins from the Order Desk, please see here – https://ninjatrader.com/blog/order-desk-updates/

Please let us know if you have additional questions.

Thank you

[Bend70]

NinjaTrader_Sev, so any news that is deemed Key can now result in a margin increase per ES contract from $500 to $11,000, without any notice?

I've got no problem with checking a calendar each day, but surely NT has to announce any days that will be subject to such a margin increase at least before trading that day, right?
Please can you confirm this will be the case, and where such a calendar is located? Thanks

[Robotman]

Hi NinjaTrader_Sev ,

Please let us know if you have additional questions.

You didn't answer ANY of my questions. You merely restated what was in the newsletter. Did you even read my post?

Sincerely,
Robotman

[rocker84]

This is a nightmare for my bots

[Lancer]

This is what they told me:

Q: To avoid surprise margin increases, where can I find the list of what are the “key economic news announcements” for which day trading margins will be increased?

A: The changes to margins for major events will be applicable to many historically important announcements, such as monthly employment data, FOMC meeting announcements, and more recently, CPI announcements. It’s difficult to list which announcements will have margins updates since the relative importance of those announcements changes. Several months ago the CPI release was a non-event to the market, but as inflation has become a focal point it has become the largest market moving event each month. With this in mind, our Order Desk monitors volatility around various events and makes updates to margins when necessary to protect our traders. The intent is to have margins returned to standard intraday rates as soon as possible, but not until conditions are viable for trading with lower requirements. Again, these changes apply only to select markets, and not all products will have their margins increased.

Certain events historically had volatility impacts and other news announcements are starting to have more a volatile reaction. I believe our team is already working to implement a key economic news announcement list to add to our calendar. If they are not, I can submit your suggestion to create one. Keep in mind there may be some events, such as the Ukraine/Russia conflict, that don't have set date and impact markets greatly.


Q: How many minutes prior to the scheduled release of key economic news announcements will day trading margins be increased?

A: At this time we are looking at 15 minutes before a key news event.


Q: How many minutes after the scheduled release of key economic news announcements will day trading margins be returned to normal?

A: There is no set amount of time after news items when margins will be returned. It all depends on the volatility. Historically most volatile moves are over within a few minutes. However, previous volatile events such as the night of the US election, had volatility lasting from market close until 1-2 am the next morning.


Q: Is there any software development underway for a new feature in the NinjaTrader platform to give visual indication and sound alert when day trading margins are increased, then returned to normal? (For example, a colored dot similar to the existing connectivity indicator in the lower left corner of the Control Center, located next to the connectivity indicator.)

A: At this time I am not aware of any, but can pass your suggestions to our software development team.


Q: This new intraday margin policy change is going to be a disaster for NinjaTrader customers for whom margin is a concern unless you make it very clear in advance what are the triggering events (a set list), when changes will occur before and after events, and provide an in-platform indication of margin status. Otherwise, it is going to be too much to try to keep track of, and will be a major distraction during the intraday trading session, resulting in margin mistakes and customers leaving NinjaTrader. You cannot expect customers to be constantly checking the Order Desk Updates web page multiple times all day to learn the status of such an uncertainly variable intraday margin.

A: This does bring up some topics to forward to discuss with our risk management team. Keep in mind, another option is to make sure the account is properly funded if you plan on trading these news events. Leverage with the low intraday margins work both ways. If the market is moving in your direction during a news event, it can lead to profits that are higher than expected to a trader's normal trading strategy. However, if the market moves against a trader these volatile swings that occur in less than 1 second can take the account negative. In which case, the trader would need to fund the account to cover the debit as soon as possible.

[Robotman]

Hi Lancer

So, you have gotten the same non-answers that were already in the newsletter. These margin increases are to protect the brokerage, not the trader. In fact, it punishes the trader with margin violations when he tries to trade the news. Let's say a trader trades a 3 lot with a $25,000 account. One minute he's fine and knows the risk and the next moment he's being dinged with margin violations. All because someone at NT brokerage randomly changed the rules.

By the way, taking liquidity out of the market IS WHAT CAUSES VOLATILITY DURING NEWS EVENTS. So, NT brokerage is actually causing MORE volatility by reducing the number of limit orders during news releases.

Q: Is there any software development underway for a new feature in the NinjaTrader platform to give visual indication and sound alert when day trading margins are increased, then returned to normal? (For example, a colored dot similar to the existing connectivity indicator in the lower left corner of the Control Center, located next to the connectivity indicator.)

A: At this time I am not aware of any, but can pass your suggestions to our software development team.

That's NinjaTrader's way of saying "we'll pass this request on to the black hole of oblivion. Never to be heard of again".

Q: This new intraday margin policy change is going to be a disaster for NinjaTrader customers for whom margin is a concern unless you make it very clear in advance what are the triggering events (a set list), when changes will occur before and after events, and provide an in-platform indication of margin status. Otherwise, it is going to be too much to try to keep track of, and will be a major distraction during the intraday trading session, resulting in margin mistakes and customers leaving NinjaTrader. You cannot expect customers to be constantly checking the Order Desk Updates web page multiple times all day to learn the status of such an uncertainly variable intraday margin.

This is my exact issue. This random 'pick and choose' events to dramatically increase margins only hurts traders and protects the brokerage. It is irresponsible to not have a safety net built into the platform to actually "protect the trader". My suggestion of using 2 different risk templates that would be triggered by the brokerage, along with a visual and audible indicator would actually serve the traders best interests. They already have the code set up when the platform is disconnected from the NT server. It would be relatively easy to add code when there is a margin increase.

Having an order rejection pop-up telling the trader he screwed up after he did everything right except constantly monitor and refresh a webpage is not "protecting the trader", it's penalizing the trader.

Respectfully,
Robotman

[AndyM]

So the initial margin for the ES at key economic events is $11,000 so if I had four contracts I need a margin of $44,000 and maintenance margin of $40,000? Is that correct?

[jeronymite]

There is a broader issue here. Namely, actual leverage and margins need to be available to the platform in real-time. This is relatively straightforward conceptually, but perhaps less so in practise.

The current approach to this in the platform is based on static Risk Templates that require manual downloading of updates by traders when changes are made. Any such changes are not (to my knowledge) notified in real-time. Importantly, Risk Templates apply only to Simulation accounts. There is currently no way in the platform to manage leverage/margins on demo or live accounts.

The management of actual leverage/margin in real-time in all account types requires at least the following:

• Real-time leverage/margin information available from the broker
• Supported broker API/Adapter functionality to access and update leverage/margin information in the platform in real-time
• Supported platform API/UI ways to access/display up-to-date real-time leverage/margin information

There is likely significant program development required to achieve those things. There may even be a need to develop protocols for the provision/transmission of the data, an area I am not familiar with. It also requires engagement and cooperation with relevant supported brokers. In the case of NinjaTrader Brokerage, this latter requirement should be straightforward.

Supposing these technological advances occur (and one can only hope they do). There are still issues around traders responding to changes to leverage/margin information in real-time. As has been highlighted in various posts, particularly in relation to the current NinjaTrader Brokerage announcement, there is potential for active trades, entered with perfectly adequate margins at the time, to be "instantly" in margin violation when a "protective" change is made. This then points further "upstream" to brokers' policies on these matters and their communications to traders.

In summary, easily accessible real-time knowledge of leverage/margin information for all account types (for all supported brokers) is a necessary requirement for safe trading at any level. There is potentially significant program development required to achieve this, including cooperative work with supported brokers, but it is important functionality that should be scheduled work for implementation in the relative near future. Clear communications from brokers on policies and processes around leverage/margin management are also essential.

Thanks.

[Robotman]

Hi jeronymite

You seem to be intimately familiar with the inner workings of Ninjatrader brokerage and the platform development team at Ninjatrader.
Are you a third party vendor answering for Ninjatrader now?

Everything you listed as reason it might be difficult are just guesses and I would answer with, "So?"

Robotman

[jeronymite]

Robotman Not involved in the development of the platform or the organisation in any way whatsoever. I'm simply a long-term user of the platform and a NinjaTrader Vendor who has produced an AddOn for the platform. My comments come from my experience in other major tech organisations and what I view as needful from an IT professional viewpoint. My "influence" in NinjaTrader is identical to any other contributor to the Forum -- I offer my opinions for their consideration, nothing more. It is entirely up to NinjaTrader to determine if my comments are useful or not, just as for any other Forum contributor. They are solely my personal perspective on the matter. That's all. Guesses? If you see it that way, that's fine. Based on experience and hopefully useful in trying to understand what might be involved? I think so. But I'm happy if others with better understanding and insight correct me, particularly NinjaTrader.

Thanks.

[NinjaTrader_SergeyS]

Hello Robotman and jeronymite,

Thank you for your posts and contribution to this topic.

We have escalated this to our management team and we will be following up with more information as soon as possible.

Thanks in advance for your patience on this.

[NinjaTrader_Dennis]

Hello,

Thank you for your post.

Below are some answers to the questions that have been asked in this post.

Would you immediately forward me a list of your "key economic reports"?

Our trade desk calendar lists the current major events that will have margin raised – these currently include the Employment Report, FOMC meeting announcements and CPI numbers. However, NinjaTrader reserves the right to change margins on other news and geopolitical events that may cause illiquidity.

Who deems what reports are "key"?
The trade desk managers current market conditions and upcoming releases for those that have the potential to move markets significantly.

How are we to know which reports are "key"?
If they are listed on the trade desk calendar or have the potential to be significant market moving events.

And who deems when "market volatility is determined to present manageable risk" and how is that determined??? How are we supposed to know when that is???

Our risk team will monitor market conditions and make that determination in real-time. It is expected to be roughly 15-20 minutes after the announcement that we should see margins return to their normal levels. Given these changes will be in effect for roughly 30 minutes, they should not have a material impact on traders.

By the way, taking liquidity out of the market IS WHAT CAUSES VOLATILITY DURING NEWS EVENTS. So, NT brokerage is actually causing MORE volatility by reducing the number of limit orders during news releases.

Analysis has been done related to this and the number or orders placed through NT prior to the news event is negligible in relation to the total market volume. Many traders already avoid these situations on their own.
How many minutes after the scheduled release of key economic news announcements will day trading margins be returned to normal?

The expectation is for margins to return to normal levels shortly after the news release, say 15-20 minutes. Margins may remain elevated longer if conditions warrant it. These margin changes will be in effect for roughly 30 minutes around the events and shouldn’t have a material impact on many traders.

This is a nightmare for my bots

We would need to evaluate the specific conditions for the bots, but if they are running long-term strategies, they should be operating with the assumption initial margin is required anyway. If this is the case, there should be little to no impact. If these bots run intraday strategies, then they may be impacted, however many traders with automation disable their bots on days of major news events as cause market distortion and can throw signals counter to the intended strategy. A final and complete solution would be to fund the account further to remove the margin as a requirement for the trading system. Reducing the leverage of the account will resolve any rejection potential for the bot.

This is my exact issue. This random 'pick and choose' events to dramatically increase margins only hurts traders and protects the brokerage. It is irresponsible to not have a safety net built into the platform to actually "protect the trader".

This policy is designed to specifically protect traders that may not be aware of new event timings or understand the potential impact on their accounts. Previous CPI announcements have seen the market gap beyond levels that traders are accustomed to. This policy serves to limit the potential impact of very short-term risks. If a trader wants to trade all events, they can fund their account further to have the appropriate margin relative to the potential risks to their accounts.
The major economic events for a given month are well documented for the public to consume. NT lists the clear major events on our calendar, but there are certainly others with the potential to move markets. Traders can and should be aware of upcoming events and how those may impact the trading conditions for short periods of time without reliance on the broker.

Are we to now have the "Order Desk Updates" web page open and constantly refreshing to see if NT Brokerage has randomly increased margins?

These changes are not random in the least. They will occur roughly 15 minutes prior to major economic news events. A sample of those events can be found on the trade desk calendar.

Will NT Brokerage issue a pop-up and sound alert when it increases to the initial exchange margin? Why not?

No – There has been significant feedback previously that pop-ups related to these items interfere with trading more than they assist. You can check the order desk updates page on days there is a news event for up-to-the-minute margin changes.

Please let me know if I may be of any further assistance.

[Lancer]

In the discussion on this topic at futures.io, the NinjaTrader representative provided additional clarification:

"Hello,

We wanted to thank everyone for their comments.

We sincerely appreciate the feedback and want to provide an update regarding our recent announcement on margin updates around major news events.

For major economic news events, margins will be raised to 4 times day trade margins 15 minutes prior to the announcement. News events that will be impacted are reflected on our Trade Desk Calendar. This policy will apply to new positions only and existing positions will not be affected.

We expect margins to return to day trading levels roughly 5 minutes after the announcement, based on market volatility.

Thanks."

[NinjaTrader_Dennis]

Lancer Thank you for sharing our update from Futures.io.

I had just come here to share the same news.

Thank you all for your patience in this matter.