European Securities and
Markets Authority (ESMA) laws
She
announced European
Securities and Markets Authority (ESMA) On imposing new regulatory
restrictions on CFD brokers, to ensure greater protection for retail clients.
These new restrictions will enter into force on August 1, 2018, and will
directly affect all retail clients trading with a financial intermediary subject
to European Union laws.
The Securities Commission's appointments include the following
restrictions and the following changes:
1. Imposing restrictions on the leverage of all products, as
follows:
· 30: 1 for major currency pairs
·20: 1 for
non-major currency pairs
· 20: 1 for basic indicators
· 20: 1 for gold
·10: 1 for the goods
· 10: 1 for non-core equity indices
2: 1 for
cryptocurrencies
2. Closing positions as soon as the account reaches
50% of the margin, which means that once the value of the client’s capital in
his account reaches 50% of the used margin, all open positions will be
automatically and compulsorily suspended.
3. Ban any kind
of bonus or financial reward on retail accounts, or any financial or
non-financial offer made to retail customers.
4. Negative
balance protection: You will not incur losses greater than the money deposited
in your account.
5. Consolidated
risk warning includes the percentage of losses in retail client accounts with a
CFD broker.
To read the complete new law issued by the European Securities and
Markets Authority, please click here.
How do these changes
affect a trader?
These changes will affect your account in the following ways:
1. The available margin level will be raised for most
products linked to your new and open positions. For example, if you open a
long-term contract (contract size 100 thousand) on the major currencies (EURUSD
at a price of 1.1630 for example) and the current required margin is $ 1,163
(leverage 100: 1), the required margin level will increase from August 2018 to
3,489 Dollar (1: 30 leverage).
2. Your positions
will start to liquidate automatically, if the value of the capital falls to 50%
of the basic level of the required margin; new orders may be rejected due to
insufficient funds in your Meta Trader 5 account.
3. New orders may be rejected due to insufficient
funds in your Meta Trader 5 account.
These new changes will affect your open and new positions, so you may
have to add more money to your account, to meet new margin requirements that
will rise above current levels. Alternatively, you can close some of your open
positions to ensure that you have sufficient funds in your account to meet the
new margin requirements. If you do not deposit more money in your account or do
not close some open positions in your account, the system will automatically
close your deals in line with the terms of the client's contract.
Who is affected by these
changes?
New leverage restrictions and negative balance protection terms apply to
all retail clients, who trade with a CFD broker and are subject to European
Union laws.
Is there any
alternative?
The regulatory changes imposed by the European Securities and Markets
Authority (ESMA) aim to provide retail clients with more protection by reducing
the maximum risk (leverage) that they can take when trading CFDs, and by
ensuring that all brokers guarantee to their clients that they will not incur
At a loss higher than the value that they deposited into their trading account
(negative balance protection). In contrast, professional customers will not be
affected by the new changes imposed by the European Securities and Markets
Authority (ESMA). Clients can trade at higher levels of leverage by changing
their rating to "Professional Client”.
Please note that not all clients are eligible for this
classification and therefore this will be confirmed by the review that will
take place.
Reclassify the customer and assign him as a professional customer. Press
here
We understand that these organizational changes cause a customer to
rethink many things. If you have any questions related to any of the above,
please do not hesitate to contact us