Potential mass exodus from Spreadbetters.

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Lepope

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Jan 15, 2018
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#1
Got an email from my spreadbetter, telling me that margins are likely going through the roof on all instruments. This is due to ESMA's plan to restrict the leverage available to retail clients to a maximum of 30:1. In plain english, unless you have hundreds of thousands of pounds in your account, you're out the game.

Having rung around most spreadbetters today, it appears that this is across the board and having spoken to my own spreadbetting firm at length today, it appears that this is a done deal.

I trade forex and indices. Can someone recommend a broker, (or alternative vehicle to spreadbetting), to trade these markets, ie a broker who will deal with the average man in the street, not just a professional.

Thanks.

David.
 

cbrads

Well-known member
Mar 11, 2014
1,156
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#3
30:1 sounds pretty sensible to me. You'd need a grand in your acc to trade the DOW at £1/pt, whats wrong with that? or have I misunderstood?
 

kalott

Active member
Jul 10, 2004
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Sweden
#4
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tomorton

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Feb 28, 2002
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#5

kalott

Active member
Jul 10, 2004
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#6
30:1 sounds pretty sensible to me. You'd need a grand in your acc to trade the DOW at £1/pt, whats wrong with that? or have I misunderstood?
yes, if we get 30 on indices and major forex?

and maybe negative balance protection? (not sure about that)
 
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new_trader

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Jan 1, 2006
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#7
Got an email from my spreadbetter, telling me that margins are likely going through the roof on all instruments. This is due to ESMA's plan to restrict the leverage available to retail clients to a maximum of 30:1. In plain english, unless you have hundreds of thousands of pounds in your account, you're out the game.

Having rung around most spreadbetters today, it appears that this is across the board and having spoken to my own spreadbetting firm at length today, it appears that this is a done deal.

I trade forex and indices. Can someone recommend a broker, (or alternative vehicle to spreadbetting), to trade these markets, ie a broker who will deal with the average man in the street, not just a professional.

Thanks.

David.
They only mention CFD's and Binary Options, nothing about Spread-betting. CFD's are generally considered to be a more "Professional" product so I can understand why they want to limit access to retail customers.
 

Lepope

New member
Jan 15, 2018
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#9
30:1 sounds pretty sensible to me. You'd need a grand in your acc to trade the DOW at £1/pt, whats wrong with that? or have I misunderstood?
I don't know, they're mentioning needing 23k in your account just to do 10pp on Ftse. as opposed to £155 now. That's quite a jump in my eyes. That being said, I have my doubts as to whether they know the true figures.
 

new_trader

Well-known member
Jan 1, 2006
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#10
No it's everything.
I have accounts with 2 different spread-betting brokers and until I get the e-mail you got, I will give myself the benefit of the doubt and say that it is only CFD's and Binary Options and any other leverged product that is considered "professional".

Retail clients are the bread and butter for Spread betting companies. If what you are saying is right they would all go out of business...£23K to trade 10pp? You are kidding!! My DMA broker in the US doesn't require margins anywhere near that size to trade real E-mini S&P500 Futures contracts @ US$50/point.
 

tomorton

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Feb 28, 2002
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#11
I have accounts with 2 different spread-betting brokers and until I get the e-mail you got, I will give myself the benefit of the doubt and say that it is only CFD's and Binary Options and any other leverged product that is considered "professional".

Retail clients are the bread and butter for Spread betting companies. If what you are saying is right they would all go out of business...£23K to trade 10pp? You are kidding!! My DMA broker in the US doesn't require margins anywhere near that size to trade real E-mini Futures contracts @ US$50/point.

I've emailed my account manager at my SB firm, will see what they can say.
 

cbrads

Well-known member
Mar 11, 2014
1,156
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NW England
#12
I don't know, they're mentioning needing 23k in your account just to do 10pp on Ftse. as opposed to £155 now. That's quite a jump in my eyes. That being said, I have my doubts as to whether they know the true figures.
That doesn't make sense to me, with £23K in your acc, you should be able to trade FTSE at £3/pt without using any margin...
 

tomorton

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Feb 28, 2002
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#13
LCG can only say nothing has been announced yet re any leverage changes, so they can only wait for what the FCA decide and then go with it.
 

kalott

Active member
Jul 10, 2004
674
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Sweden
#16
"These high-earners will typically pay £85,000 a year in transaction fees to the platform, meaning they pocket many multiples of that."

IG expect 50% of the punters will "go pro"?

FT.com

search for

Spread-betting rise threatened by EU rules
 
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new_trader

Well-known member
Jan 1, 2006
6,163
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#17
"These high-earners will typically pay £85,000 a year in transaction fees to the platform, meaning they pocket many multiples of that."

IG expect 50% of the punters will "go pro"?

FT.com

search for

Spread-betting rise threatened by EU rules
So far, every article I've read only mentions CFD's and Binary Options.
 

tomorton

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Feb 28, 2002
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#19
FCA say this is an ESMA initiative and FCA is committed to simply follow whatever is in their restrictions as and when announced.

ESMA will issue a consultation shortly.

Regardless of what FCA said about just following ESMA, it might be that they have some form of exemption powers as applicable to the UK situation - as far as I can make out spreadbetting is either illegal in most other countries or is not offered as it is not tax-free.
 

tomorton

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Feb 28, 2002
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#20
ESMA today published their consultation on potential CFD and binary options measures to protect retail investors.

https://www.esma.europa.eu/press-ne...ntial-product-intervention-measures-contracts

https://www.esma.europa.eu/sites/de...easures_on_cfds_and_bos_to_retail_clients.pdf

https://www.esma.europa.eu/sites/de...-99-930_pi_call_for_evidence_january_2018.pdf

Considering restricting CFD leverage but also negative balance protection., As for binaries, a complete prohibition is under consideration.

The consultation questions appear to be aimed at businesses only.

Still no mention of conventional financial spreadbetting. However, it is possible that ESMA's definition of CFD's is so wide as to include SB -
"3. A CFD is a derivative other than an option, future, swap or forward rate agreement, the purpose of which is to give the holder a long or short exposure to fluctuations in the price, level or value of an underlying, irrespective of whether it is traded on a trading venue, and that must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event."

The issues they highlight with respect to CFD's and BO's could be equally applied to SB so it would be odd for them to ignore SB and give it carte blanche.

Consultation responses are required by 23.59 Paris time on 5 February.