ESMA & Trading Outside of the EU

FXX

Experienced member
1,138 187
Its starting to look like these 3 options/choices then :

1) put up the extra margin to cover reduction in leverage(down from 1:300 to 1:30) and continue spreadbetting with your UK broker as before with your funds in the safety of UK regulators.

2) Apply for an account like IG ,IC markets outside the EU, trade CFD's (no spreadbetting) on higher leverage e.g (1:500 forex..1:200 indices) on a smaller margin account and deal with the tax implications and also the fact its none uk regulated.

3) If you meet the criteria then apply for professional status.

Any other options then feel free to add...
Just seen a video from ukspreadbettting. Com

Apparently to be a professional trader you only need 2 out of the 3 rules to be classed as one

1)more than 10 trades per quarter
2)portfolio greater than 500k
3)works in financial services


I think I might be able to be classed as a pro trader given that I have 20 years exposure in the financial services industry.

Edit:
Just co firmed this with my broker. Going to apply for professional status.
 
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FXX

Experienced member
1,138 187
So my broker couldn't give me a satisfactory response so I am persisting the question again this time in layman's terms since they can only spew scripted responses. They can't explain why I can't open more positions given that I have been trading at 10:1 since the account opened well over a year ago. The only thing that makes sense is they have reduced my leverage below 10:1 which is unacceptable on a major currency pair. Will update when I get news back.

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new_trader

Legendary member
6,181 1,258
......cant be arsed to be placing funds outside Europe....big brother will close loopholes as soon as they can i suspect ....

but great work guys

N
That would be getting into the realms of Capital Controls and the implication from that would be far more worrying and wide reaching than ESMA margin requirements.
 

inzimam

Senior member
2,464 267
CFD's are only subject to Capital Gains tax and not income tax so as long as your gain is less than the £11300 tax free threshold then you don't even have complete a tax return as far as I understand and will not be hit with any tax.

It's the net gain also, so you can offset any losses.

I'm in the boat that I could probably make that much profit a year so it might be best to move to IG in Australia and trade CFDs
 

dowsp

Member
61 3
On speaking with City Index,

You can still trade Options on things like the Indexes with just the given quoted prices...
but you cannot get it on a lower margin price for say Monthly Options...

where for eg a call option on say August Wall Street 25800 call option for eg, may be quoted at say 100 points at say a stake of 1 or 2 GBP a point... (a total of either 100 GBP or 200 GBP ) and before ESMA you may had paid a lower fee on a margin at say 35 points... per point to own that option ...(say 70 or 140 GBP for eg out of your account)

but instead since ESMA has come in... you now will have to pay the FULL quoted price of 100 points..
(for eg say either 1 x 100 = 100 or 2 x 200 = 200 GBP)

BUT you dont have to pay 10 Times more than 100 points that could cost 100 x 10 = 1000 ..or more
or have to pay say 10 x the prior lower fee of 35 points that would have been 35 x 10 = 350

so you could hold a position on the Dow Jones for say 100 points X your stake per point..

I am told if you are say buying Daily Wall Street Options that can be as low as say 5 to 10 points...
that you can still pay those same prices as before ESMA came in....

so you dont have to pay 10 x that ammount which say could have been 10 x 5 = 50

NOW thats what CITY INDEX TOLD ME...

BUT when I asked IG Index .... I got two different suggestions...

Initially I was told similar as what City Index told me...

BUT I asked for written conformation.... and they enquired with their options desk..
They said that the prices would be 10 x more....

SO I AM STILL UNSURE HOW IGs OPTIONS Prices may occur....

when I last looked they were still seeming the same as they used to before on certain Options, such as the daily and weekly options that they offer on say Wall St for eg...

ON their monthly options... they for some reason are are only showing or offering very few listed ...

that maybe because they are intending to ammend their pricing on what they offer..

BUT in theory based on what City Index told me.. if your just buyig straight Call or Put Options and NOT SELLING Options on Margin.... then you should not need to be paying 10 X the amount...

CITY INDEX always used to offer their option prices on wall st for eg.., at a reduced margin rate..

BUT I dont think IG did offer their options at a lower margin rate...

IF you trade options with these companies however... at least you can still trade certain Index like markets at low costs....

You be on what they describe as a restricted account... where you are limited to only being able to trade certain markets.. or may you wont be able to trade futures but could trade or BUY straight call or put Options with them...

IGs Options Customer service no longer exists... so you cannot speak direct with them..which has become one of their real downfalls as at one time you could have spoke direct to them..

Where as City Index you can still speak with their Options Customer service..
 
Last edited:

SUNSEEKER

Established member
872 12
Good morning,

Welcome to a new world. The first thing I saw this morning when I opened my screen was an advert for Plus 500, where they suggested you trade Bitcoin, and then after that promotional sentence, it said: "80% lose".

I imagine these warnings will be ignored by people just like smokers fade out the images on the cigarette packages.

Still, looking at the screen this morning, I have 2 broker platforms side by side. One side has a broker where I have opted for PRO status, and next to it a broker where I haven't gotten around to apply for PRO status.

I bring up the Dow ticket. I input the average stake size for UK clients, which I have been told is around £7.50. To make it easier, I input £10.

Dow margin on PRO platform = £1,250

Dow margin on NON PRO platform = £12,500

So in answer to your question Sonicscooter, there is a good chance that people don't have an extra £11,250 spare capital available to deposit on their trading account.

I have written 3 articles about ESMA on my website www.tradertom.com. I have fought ESMA as a citizen by argument and reason. I supported IG 's initiative on REPLYTOESMA.

I argued that Binary should not tarnish everything else, including spread betting and CFD trading. I am glad to see Binary gone, but I doubt you can simply remove an industry. Did the alcohol industry disappear during the Prohibition? No, it just moved across the border. This is in my mind what ESMA has achieved. They have exported the problem elsewhere, but it will still rear its ugly head.

ESMA could have achieved a sensible outcome by demanding a Negative Balance Protection from all brokers, on par with what BAFIN in Germany had done in 2017. It would have achieved a stop to the disaster stories we saw during the "Flash Crash" and the "2015 Swiss National Bank Announcement".

A typical UK spread betting account is about £2500. People will wake up this morning and realize there is not much fun in trading FTSE and having to deposit £380 for every pound staked. They will, if they can, deposit more money on their account, but I don't think this will apply to the majority.

I run a private signal channel on Telegram, where I tell people what I buy and short and when. There are currently 496 members in there. I should just add that I am not charging for it. This is not an advert in disguise.

I ran one of those SurveyMonkey surveys where I asked a question about the new ESMA rules. It was a pretty simple survey, and all I wanted was to get a feel for what people would do when faced with the new ESMA rules.

Question 1: Can you, and if you can, will you apply for Pro Status?


15% replied they could and would.



Question 2: Assuming you can't successfully apply for Pro Status, will you deposit more funds on your account?

37% said they would deposit more funds on their trading accounts.



Question 3: Assuming you can't successfully apply for Pro Status, will you seek an account outside the EU?


74% responded that they would seek an account outside the EU.


If those numbers are correct, and I will be the first to argue that the sample space is small, then what ESMA has done has backfired. ESMA intended to create a safer environment for the private investor. Instead they have thrown retail traders into the hands of foreign CFD providers.

Of course just because a CFD provider is based outside the EU does not make him the big bad wolf. However, when it comes to investor protection, we are privileged in the EU. My articles make an argument for Australia because of the bank protection guarantees as well as an Ombudsman, as opposed to selecting a broker on say Cayman Islands, where I have no protection.

So today is D day. For some it is business as usual, while for others, it is a day of wondering what to do. I have been in the industry since 2001. I dont agree with the CEO of IG Markets, who said that the industry brought this on by itself. We didn't. We got more competitive.

In 2001 the spread in the DAX was 8 points. The spread on the quarterly Dow was 16. You barely had charts, let alone online platforms. We have innovated ourselves into the point where people arriving to the trading industry do not have to worry about charting packages costing 300 dollars a month, because the brokers provide it for free. They don't have to worry about news flow because most brokers provide it for free.

Trading is really not an easy game to crack. You need your A-game every day. It is a job or a serious hobby. All the brokers have done is make it easy for you to implement your game. Would you rather trade DAX at a 1-point spread or a 4-point spread?

I don't work in the industry anymore, and I haven't done since 2009, but I don't see how this was the industry's fault. The advertising standards made sure the adverts were kept in line. The Ombudsman handled complaints. The brokers made sure they kept in line. The odd fine here and there made sure the FCA showed their teeth from time to time. So what happened? Was it too much margin? OK, fine, reduce it to 100 to 1 and keep it there.

ESMA has committed a grave error, and they have not learned from history. We may not have a similar situation apart from Japan's ban on margin a few years ago, but we have from so many other avenues in life. When you create a void, it will be filled by someone.

Tom
 

FXX

Experienced member
1,138 187
It's going to be interesting to see how many brokers open up shop outside the eu and offer clients an easy migration to those accounts. The UK retail industry has taken a hit. My soon to be ex broker can't explain and is ignoring me when I query it. Basically I have been trading at 10:1 since long before the changes have been enforced. Since the changes I can no longer open 5 positions and instead am limited to 2. Now given that I am already below the min rate I should have been unaffected. Well several emails in which they pointed me to the Esma documentation that doesn't mention margin increases in isolation to leverage changes. 2 days and still no answer.

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tomorton

Legendary member
7,160 931
Good article again Tom.

Ah, but mate, regulators don't work for the benefit of the consumers serviced by their respective industry - they work firstly for their political masters and secondly for the industry constituents. The most important political masters are the ones in power in central government - their employers. The most important industry constituents are the biggest - who have been and will be around longest and who have most clout with the political masters.

The consumers are only important as a potential (but disorganised) source of embarrassment for their political masters, but I suspect in the current ESMA CFD margin situation, the groundswell of opinion in favour of tougher regulation came from the large players in the financial sector who could see lots of potential investment cash drifting into self-investment schemes rather than their own products. Once they'd convinced the regulator it was a free perk for them, they must be calculating much of that previously self-managed money will now be coming their way.

Well, so it goes.
 

FXX

Experienced member
1,138 187
Just found a leverage calculator and it looks like AXI trader, my soon to be ex broker, has reduced my leverage to 3:1

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SUNSEEKER

Established member
872 12
Good article again Tom.

Ah, but mate, regulators don't work for the benefit of the consumers serviced by their respective industry - they work firstly for their political masters and secondly for the industry constituents. The most important political masters are the ones in power in central government - their employers. The most important industry constituents are the biggest - who have been and will be around longest and who have most clout with the political masters.

The consumers are only important as a potential (but disorganised) source of embarrassment for their political masters, but I suspect in the current ESMA CFD margin situation, the groundswell of opinion in favour of tougher regulation came from the large players in the financial sector who could see lots of potential investment cash drifting into self-investment schemes rather than their own products. Once they'd convinced the regulator it was a free perk for them, they must be calculating much of that previously self-managed money will now be coming their way.

Well, so it goes.


Thank you for the lesson. Where is Ann Rand when you need her.
 
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tomorton

Legendary member
7,160 931
It'll be interesting to see what the SB industry does about this. I see LCG reduced their min stake levels to 10p / point / pip. Don't know if that's permanent of course. I do wonder if the unexpected side-effect of the 2018 ESMA regulations will be more subtle inducements to open an account, not less. Don't expect all such measures to be put on the table before the end of the 3mth trial period, these are commercially sensitive areas, and market share is key.

Meantime, without bragging, my account 's sufficiently well funded I don't see a major impact likely. 'course, I won't be having 15 or 20 positions open at the same time any more, but maybe that wasn't such a good idea anyway........
 

dowsp

Member
61 3
If the Uk exits the EU via Brexit...

Could this realter or drop the ESMA situation ?

What is the Minimum that you can trade the Dow with the OZ brokers

ie how much would you need to place in an account to trade the minimum stake with their cheaper type brokers..

I very much doubt that we could trade the Dow with them similar to the prices of Spread betting where we could trade as low as 50 P or 1 GBP a point...

I suspect that it willl be the equivalent of more like 5 to 10 GBP a point...maybe like the Mini Dow contact in the USA..

I think at one time you could open a USA account for as low as 3 to 5 K GBP or maybe even in $s

if so..
What would be the difference between opening a USA account V an OZ account..

I just noted Sunseekers Toms opinion on leaving the EU and its effect on ESMA on his website...

31st July 2018 at 6:40 pm

Tom, I wonder what UK CFD brokers will do once the UK finally leaves the EU. Do you think they’ll revert back to 200:1 or so margins, and will some of them offer accounts to EU residents?
Reply

Tom H says:
31st July 2018 at 9:29 pm

I believe the FCA will still want to enforce the rules that ESMA has set in motion.
How many rich Pro Traders are there likely V small traders say within the UK ?

What % difference I wonder....

Is it enough to satisfy the Brokerages or Spread betters not to really be bothered about Small traders any more and welcolme the FCA ruling...

IF there is a much greater % of smaller traders... Then those who run such services have not really stuck up for the small trader IMO...to fight the FCA ...

If there is enough conviction and demand... Small traders should rebel and demand such GOVT BS regs to be overruled...
 
Last edited:

pigbear

Member
56 3
On speaking with City Index,

You can still trade Options on things like the Indexes with just the given quoted prices...
but you cannot get it on a lower margin price for say Monthly Options...

where for eg a call option on say August Wall Street 25800 call option for eg, may be quoted at say 100 points at say a stake of 1 or 2 GBP a point... (a total of either 100 GBP or 200 GBP ) and before ESMA you may had paid a lower fee on a margin at say 35 points... per point to own that option ...(say 70 or 140 GBP for eg out of your account)

but instead since ESMA has come in... you now will have to pay the FULL quoted price of 100 points..
(for eg say either 1 x 100 = 100 or 2 x 200 = 200 GBP)

BUT you dont have to pay 10 Times more than 100 points that could cost 100 x 10 = 1000 ..or more
or have to pay say 10 x the prior lower fee of 35 points that would have been 35 x 10 = 350

so you could hold a position on the Dow Jones for say 100 points X your stake per point..

I am told if you are say buying Daily Wall Street Options that can be as low as say 5 to 10 points...
that you can still pay those same prices as before ESMA came in....

so you dont have to pay 10 x that ammount which say could have been 10 x 5 = 50

NOW thats what CITY INDEX TOLD ME...

BUT when I asked IG Index .... I got two different suggestions...

Initially I was told similar as what City Index told me...

BUT I asked for written conformation.... and they enquired with their options desk..
They said that the prices would be 10 x more....

SO I AM STILL UNSURE HOW IGs OPTIONS Prices may occur....

when I last looked they were still seeming the same as they used to before on certain Options, such as the daily and weekly options that they offer on say Wall St for eg...

ON their monthly options... they for some reason are are only showing or offering very few listed ...

that maybe because they are intending to ammend their pricing on what they offer..

BUT in theory based on what City Index told me.. if your just buyig straight Call or Put Options and NOT SELLING Options on Margin.... then you should not need to be paying 10 X the amount...

CITY INDEX always used to offer their option prices on wall st for eg.., at a reduced margin rate..

BUT I dont think IG did offer their options at a lower margin rate...

IF you trade options with these companies however... at least you can still trade certain Index like markets at low costs....

You be on what they describe as a restricted account... where you are limited to only being able to trade certain markets.. or may you wont be able to trade futures but could trade or BUY straight call or put Options with them...

IGs Options Customer service no longer exists... so you cannot speak direct with them..which has become one of their real downfalls as at one time you could have spoke direct to them..

Where as City Index you can still speak with their Options Customer service..
However if you sold an option for eg SPX Aug put 24700 Aug trading at 4 - 13 at let say £3 stake then what is the margin required. When you use the margin calculator it comes up blank.
 

tokyojoe

Established member
866 287
This can be done very simply, if for example you want to trade £1 per point on the dax, you need approx £600'ish in the account for every pound.

If you have intra-day movements of approx 500-700 points & you are a point & click merchant then there's more than enough potential on the table.

Stick a few grand in, if you can't afford to stick a few grand in the account to play small stakes then this is not the game to be in.