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June 20, 2018

Question:What do ESMA's new updates involve and When?

Answer:

Do you live in South Africa? Then please go to HotForex ZA (South Africa) main introduction page.

ESMA has formally adopted new measures on the provision of contracts for differences (CFDs) to Retail investors.

Those measures restrict the marketing of CFDs as well as their leverage and margin close out.

  1. Leverage limits on the opening of a position by a retail client from 1:30 to 1:2, which vary according to the volatility of the underlying:
    • 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;
  2. Margin close-out rule on a per account basis. This will 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 CFDs;
  3. Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses;
  4. A restriction on the incentives offered to trade CFDs; and
  5. A standardized risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.

The changes will come into force as of August 01, 2018. HotForex has already started taking necessary action for those changes in order to ensure a smooth and seamless transition.

Are the new measures permanent?

According to ESMA, these measures will apply for three months, at which point they may be revised.

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