There are several things you must know before the ESMA’s new regulation takes effect.
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As a regulated broker, AvaTrade would like to inform you about a new regulation by The European Securities and Markets Authority (ESMA).
This regulation means that several changes are going to be made for retail clients starting from August 1st, 2018.
What are the changes?
1. Lower Leverage – Leverage restrictions will apply to the opening of a position between 30:1 and 2:1, depending on the volatility of the underlying asset.
- 30:1 for major currency pairs.
- 20:1 for non-major currency pairs, gold and major indices.
- 10:1 for commodities other than gold and non-major equity indices.
- 5:1 for individual equities and other reference values.
- 2:1 for cryptocurrencies.
2. Bonuses and other promotions will be banned.
How can you maintain your current trading conditions?
You may keep a high leverage and get bonuses by becoming a Professional Trader. In order to become one, you must meet two of the following criteria:
Sufficient trading activity in the last 12 months
You have carried out transactions, in significant size, on the relevant market (such as Leveraged CFDs, Forex, Spread Betting) at an average frequency of 10 transactions per quarter over the previous four quarters (with AvaTrade and other providers).
Relevant experience in the financial services sector
You work or have worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.
Financial instrument portfolio of over €500,000 (including cash saving and financial instruments)
Financial instruments include shares, derivatives (only cash deposits made to fund/profits realised from investing in derivatives), debt instruments and cash deposits.
It does not include property portfolios, direct commodity ownership or notional values of leveraged instruments.
For your convenience, we’ve gathered more information in the table below to highlight the differences between a professional trader and a retail trader:
|Trading Feature||Professional||Retail||More Information|
|LEVERAGED TRADING||400:1||30:1||MiFID II limits leverage on retail accounts up to 30:1. Professional Traders may apply for higher levels.|
|PROMOTIONS & COMMUNICATIONS MATERIALS||Available||Unavailable||Provision of Bonuses and other promotions, as well as the delivery of other marketing materials.|
|NEGATIVE BALANCE PROTECTION||Available||Available||All clients will benefit from negative balance protection.|
|SEGREGATED ACCOUNTS||Available||Available||Your assets are held in segregated bank accounts that are not accessed by AvaTrade.|
|DISPUTE SETTLEMENT SERVICE||Available||Available||In any disagreement regarding your trading, you are eligible to contact the Financial Services and Pensions Ombudsman service.|
|RISK WARNINGS||Available||Available||Professional clients may not be provided with the same risk warnings which must be provided to retail clients.|