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June 20, 2018

HotForex, New measures adopted to all Retail Clients by ESMA's new regulation

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Important ESMA regulatory changes.

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

The European Securities and Markets Authority (ESMA) has formally adopted the new measures on the provision of contracts for differences (CFDs) and binary options to Retail investors which Investment Firms are required to comply, as of August 01, 2018.

What are the new measures?

  1. Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, 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 major indices;
    • 1:5 for individual equities and other reference values;
    • 1:2 for cryptocurrencies
  2. A margin close-out rule on a per account basis. This will standardise 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.

Please read HotForex’s Q&A file – also available on HotForex’s Legal Documentation page – to familiarize yourself with the new measures.

HotForex Official Website

Professional Clients

ESMA’s adopted new measures apply ONLY to Retail Clients and not to Professional Clients.

If you want to learn more on this classification and how to become a Professional Client, click here.

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