MARKET REGULATIONS
New Measures Explained Let’s
start with ESMA’s measures
and later elaborate on how will they change the market later. When it comes to forex and CFDs brokers,
the
pan-European regulator will introduce drastic changes to the business model of forex and CFDs brokers. For starters, traders will no longer be able to use leverage higher than certain p r ed e f i n ed t h re s ho l d s . Te levels are as
30:1 for major currency
follows: pairs;
account. Automated closure of positions will occur when a trader’s balance reaches 50 percent of the required margin on a given position.
FX
an outcry on part of retail investors complaining to court rooms across Europe and to the relevant financial ombudsman services.
Any form of
similar rebates,
d i s c o un t s, bonuses and other
incentives that are prompting clients
to
Much less leverage available, and much more protection for retail traders
20:1 for non- major currency pairs, gold and major indices; 10:1 for
and non-major
commodities outside of equity
gold indices;
5:1 for individual equities and other reference rates and 2:1 for cryptocurrencies.
Te second part of the measures, which the regulator is going to enforce from the 1st of August all over the EU, is focusing on a margin closeout rule which is based on the amount of money in a trader’s
Negative balance protection for clients becomes mandatory for all brokers and is therefore protecting retail clients from incurring massive losses such as those registered around the Swiss National Bank’s (SNB) decision to remove the floor under the exchange rate of the EUR/ CHF in January 2015. At the time, numerous brokers and their clients lost a fortune, prompting operators to seek outstanding negative balances from their customers. Tis has led to
generate more volume while trading are also forbidden. A number of firms have been offering different sorts of bonuses which have been tied to some unrealistic tr a d i ng requ i rement s that
have ultimately cost the traders their accounts.
Last but not least, brokers will need to display a standardised warning which displays what is the percentage of their clients losing money on the market. Tis new message which is to be tied to the marketing campaigns of brokerages is aimed at unethical commercials, which are basically presenting financial markets trading as a get rich quick scheme. As an added bonus, such disclosure will
FX TRADER MAGAZINE July - September 2018 17
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