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