November 7, 2016

Over 30 Billions USD of Debt in One Day in Forex: How NBP could protect from this Tragedy

“Negative Balance Protection” is very important when trading Forex.


NBP stands for “Negative Balance Protection”.

If your Forex broker supports NBP, then you do not need to cover exceeded losses in your trading accounts, as in the loss of your trading is limited to the amount of deposit you have made.

With NBP, you do not need to pay for your debt for the rest of your life.

It is a very important feature when you choosing your broker, and many Online Forex Brokers in the world support NBP as their standard conditions.

Although, there are still many Online Forex Brokers in the world which does not support NBP…

We cannot define that type of Forex brokers carry great risks just because of that though, you do really need to be careful for your own protection.

This time, we will get into the details of Japanese Forex Market, where “Supporting NBP is illegal” and some examples of how did that condition ruin many investors’ careers.

“Over 34 billions USD of Debt” by Swiss Franc Shock

You may still remember the “Swiss Franc Shock” caused by SNB(Swiss National Bank).

When the bank has suddenly decided to not follow the policy to keep the market price of EUR/CHF more than 1.20.

The market price of EUR/CHF has fallen over 3800pips in a moment, and all CHF cross currency pairs were mixed extremely with the announcement.

Many have lost their invested funds due to the market reaction, and some Forex brokers have even announced “default” as they were not able to cover the exceeded losses in their clients’ accounts.

No NBP in Japanese Forex: Over 30 Billions USD of Debt to traders in One Day

What about Japan?

In Japan, the maximum leverage is restricted to 1:25 for retail investors, and NBP is not supported as it is the law.

With that low leverage, the Swiss Franc Shock has created

Over 34 billion USD of debt on retail traders’ side,

and these funds are not yet returned to the brokers.

Here is the data reported by Financial Futures Association of Japan.

 Retail Investors The Amount of Unpaid Loss
 Individual Accounts 1,948,000,000 JPY
 Corporate Accounts 1,440,000,000 JPY
 Total 3,388,000,00 JPY

If you are trading with an online Forex broker which supports NBP, the above amounts are fully covered by your broker, and you do not need to worry about paying them all to your broker.

Of course, there is a large number of investors in Japan, still unable to pay their loss for years.

The Great East Japan Earthquake in 2011

The another great example would be when the earthquake happened in Japan in March, 2011.

As the new was announced and spread to all over the world, JPY cross currency pairs were mixed with the event, and of course, so many investors have experienced great losses in a few days.

Number of Accounts with Exceeded Loss Amount of Exceeded Loss
 March, 2011 12216 accounts 1,694,590,000 JPY

The above numbers do not include corporate accounts, so the actual numbers would be more than the double of that.

“Negative Balance Protection” will protect Investors

It is very important to make sure that your Forex broker supports NBP(Negative Balance Protection) for its clients.

Without it, you could own a debt for your whole life.

Forex market is very volatile and liquidated comparing to other financial markets. You must need to know the risk before start trading.

Are you trading with a Forex broker without NBP? Then you may need to get prepared for paying exceeded losses in the future.

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