The European Securities and Markets Authority new rules

The new regulations by ESMA coming into effect today, the 1st of August, 2018 will have an impact on the trading conditions and restrict your trading leverage allowance- Only for EU citizens.

All EU regulated brokers should apply those changes from today.

Leverage

Till today, each broker decided about the leverage ratio that his clients can use when trading on a certain asset, for example, 1:200 on major forex pairs, and on a different asset such as crypto it could be around 1:15.

When a new client signs up with an EU regulated broker, the trader needs to fill up an investor questionnaire and regards to the questionnaire answers(previous experience and etc…) the broker decide on a certain leverage level that the client can use.

The new ESMA(European Securities and Markets Authority) rules restricting the trading leverage allowance that the broker could give to his traders.

Those are the new restrictions:
·         1:30 for major currency pairs;

·         1:20 for non-major currency pairs, gold, and major indices;

·         1:10 for commodities other than gold and non-major equity indices;

·         1:5 for individual equities and other reference values;

·        1:2 for cryptocurrencies;

Binary Options

Binary Options – a prohibition on the marketing, distribution or sale of binary options to retail investors.

*Be aware that this restriction is only regarding Binary Options.

Marketing, distribution or sale of Options to retail investors, is still legal.

Bonuses

Client’s who affected by the new ESMA regulation will no longer be entitled to Bonuses of any kind.

*Please note that this is legally non-negotiable, and bonuses will not be given to clients, even for large deposits.

Margin Close Out

Margin – is the amount of equity that you need in your account balance, in order to keep your open positions alive.

Regarding ESMA,  A margin closeout rule on a per account basis. Standardize the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more retail client’s open CFD’s position.

For example, if your account balance is 10,000$ and you have opened a position of 4000$ – if this trade will lose more than 1000$ it means that your margin use is lower then 50%, and therefore the provider(the CFD’s broker) is required to close your open position.

Incentives offered to trade CFD’s

The brokers will now have some restriction while promoting CFD’s trading to new clients.

A standardized risk warning

Brokers and publishers should inform and publish a risk warning including the percentage of losses on a CFD provider’s retail investor accounts.

The standard risk warning will be: “CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money”.

If you have any kind of questions regarding the new ESMA regulation rules- feel free to comment below and we will answer.