It Begins: FXCM Doubles Yuan Margins, Warns Of Market "Disruption And Highly Illiquid Conditions"

The last time FX brokers, still hurting from the Swiss National Bank's revaluation shocker from last January which forced brand names such as FXCM to seek an urgent bailout, scramble to hike margins was in late June just ahead of the Greek "event risk" weekend, when  numerous brokers either hiked margins on EUR positions or went to "close only" mode due to "uncertainty surrounding the Greek debt negotiations... that could lead to high volatility on the market."
So, barely one week into the new year, one which has seen the stock market suffer its worst ever first week of trading, some FX brokers are not taking chances, and in the aftermath of the aggressive plunge in the Yuan (one we warned about a month ago), have decided to minimize client stop-out risk by hiking margins.
Case in point, here is FXCM with a just released warning about upcoming "highly illiquid conditions" leading to a doubling in Yuan margins:

Dear Client,

We believe there is a chance of disruption and highly illiquid conditions in the forex market during the coming weeks (and/or months). Please be aware that market gaps tend to occur over the weekend – that is, currencies trade at prices considerably distant from previous levels.

*IMPORTANT UPDATE*  

Margin requirements will double on the USD/CNH pair after market close on January 15, 2016. See a Complete List of New Margin Requirements

Please review your account to ensure that you have enough available margin to support any new positions. You may deposit additional funds at www.myfxcm.com or close positions as needed.

Follows the traditional disclaime which FXCM itself probably should have taken to heart one year ago when after the SNB's de-pegging the firm suffered tremendous losses:

Remember that forex trading can result in losses that could exceed your deposited funds and therefore may not be suitable for everyone, so please ensure that you fully understand the high level of risk involved.

The paradox here is that pre-emptive, if correct, warnings such as this one, tend to quickly become self-fulfilling prophecies as other brokers immediately follow suit and likewise increase margin requirements, which helps mitigate total loss potential but just as quickly soaks up liquidity from the market, leading to an even more fragmented market, prone to sudden, and quite dramatic moves.

The full list of FXCM margin increases is shown below; expect every other FX brokerage to promptly jump on the bandwagon.

   FXCM Margin Update