ESMA regulatory changes


Q1) What is ESMA?

The European Securities and Markets Authority (ESMA) is an independent EU Authority that contributes to safeguarding the stability of the European Union's financial system by enhancing the protection of investors and promoting stable and orderly financial markets.

This is achieved by: Assessing risks to investors, markets and financial stability; completing a single rulebook for EU financial markets; promoting supervisory convergence; and directly supervising specific financial entities.

Q2) Why are new regulations being introduced?

ESMA has adopted new measures on the provision of Spread Bets and CFDs with the aim of increasing consumer protection across the EU by ensuring a common minimum level of protection for retail investors within the FX/CFD market.

The measures are being introduced industry-wide, meaning all Spread Bet and CFD providers servicing clients in the EU will need to comply.

Q3) What are the new regulations being introduced?

The measures being introduced for Retail clients are as follows:

Maximum leverage limits on new positions:

  • 30:1 for major currency pairs (3.33% margin)
  • 20:1 for non-major currency pairs, gold and major indices (5% margin)
  • 10:1 for commodities other than gold and non-major equity indices (10% margin)
  • 5:1 for individual equities and other reference values (20% margin)
  • 2:1 for Cryptocurrencies (50% margin)

A standardised 50% margin close out rule on an account level basis

Negative balance protection on an account-level basis

A prohibition on firms offering monetary and non-monetary benefits (excluding research and information tools)

A standardised risk warning which includes firm specific figures on the percentage of client accounts that have lost money trading CFDs.

Q4) How will I be affected?

If you are a Retail client, then the changes will affect you as follows:

  • Margin Requirements: The minimum margin you require to open any new positions will increase from 29th July onwards, across all asset classes. Any existing positions you currently hold up to the time of the increase will not be affected and will thus remain on current margin rates. You can view our new margin rates here. This also means that the leverage we offer across asset classes will reduce as a result.

  • 50% Margin Close Out Rule: If your margin level reaches the 50% margin close out (MCO) level i.e. 50% of minimum required margin to cover your open positions, we are required to close any or all of your open positions as quickly as possible; this is to protect you from possibly incurring further losses.

  • Negative Balance Protection: Your account will have negative balance protection applied, meaning that your losses cannot exceed your deposits.
The above measures will mean there will be some changes to your account from 29th July onwards, which are detailed in the Account Management FAQ.

Q5) When will the changes be happening?

ESMA’s measures are effective from 1st August 2018. However, we have taken the decision to make the changes from 29th July onwards.

Q6) Will the restrictions apply to all clients?

The changes will apply to all Retail clients. Professional Clients are exempt from the product restrictions being introduced. To find out more, visit our Professional Trader page.

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