Potential mass exodus from Spreadbetters.

kalott

Established member
677 57
"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

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Spread-betting rise threatened by EU rules
 
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new_trader

Legendary member
6,207 1,263
"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

Legendary member
7,250 969
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

Legendary member
7,250 969
ESMA today published their consultation on potential CFD and binary options measures to protect retail investors.

https://www.esma.europa.eu/press-news/consultations/call-evidence-–-potential-product-intervention-measures-contracts

https://www.esma.europa.eu/sites/default/files/library/esma35-43-904_call_for_evidence_-_potential_product_intervention_measures_on_cfds_and_bos_to_retail_clients.pdf

https://www.esma.europa.eu/sites/default/files/library/esma71-99-930_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.
 

tomorton

Legendary member
7,250 969
LCG at this stage won't say anything about what they're doing/not doing, or what ESMA's doing/not doing.

Have pressed them to respond to the ESMA consultation asap, make an announcement to clients and for most senior manager appropriate to get back to me on this.

Grrrrr.
 

Dowser

Experienced member
1,253 283
I've just received this email from IG .......

Margin rates could increase to 5% on major indices and 20% on equities

Dear Mr. Brads

The European Securities and Markets Authority (ESMA) is considering some proposals which are highly likely to affect your trading. You have until 5 February to respond to ESMA, and we would strongly encourage you to do so. ESMA does listen to the views of traders and will shape its final decision according to the feedback it receives.

What are the proposals?

ESMA has come out with a number of proposals – aimed at retail clients only – to try to increase conduct standards across the industry. We largely support these changes, but feel the leverage restrictions are disproportionate and too restrictive. ESMA’s leverage proposals include:

● 30:1 leverage on major currency pairs = 3.33% margin
● 20:1 leverage on major indices = 5% margin
● 10:1 leverage on commodities (excluding gold) = 10% margin
● 5:1 leverage on equities = 20% margin

These restrictions would apply to both spread betting and CFD trading. You can read all the proposals in full here.

How will the proposals affect your trading?

As you can see from the table, these proposals would severely increase the margin required to deal:
Spread betting:

Market – £10/point.....current margin.....ESMA proposed margin

EUR/USD..................£611.................£4073
Germany 30...............£660................£6600
Oil – Brent Crude........£1035................£6900
Apple......................£8950................£32,800

CFD:
Market.........Size................Current margin............ESMA proposed margin

EUR/USD......1 standard lot....$611.........................$4073
Germany 30...1 standard lot....€1,650......................€16,500
Oil – Brt Cde..1 standard lot.....$1,035......................$6900
Apple..........1000 shares........$8,950......................$35,800

How to respond to these proposals

It’s very important that traders share their views on these proposals. As such, ESMA has posed the following question for retail investors to answer:

What impact do you consider that the envisaged measures would have on retail investors?

We’d encourage you to share your views in full. There are two ways to do so:

1. Reply to this email with your answer to the question. Clicking the link below will open a readymade response template. We will then submit all your feedback directly to ESMA on your behalf.

2. Send your thoughts directly to ESMA. We have provided a simple form on our website, ready for you to answer the question.

Once complete, please save your form and then submit it directly to the response page on ESMA’s website. You’ll see there are a few details to complete with your submission:

● Under ‘Activity’, please select ‘Individuals’ from the bottom of the dropdown
● Under ‘Institution’, please write ‘N/A’

Once you’ve filled in the remaining details, you can attach your response and submit.

Please note your contribution may be published once the consultation closes, unless you select otherwise in your response.

More information

It’s important to remember that your account will not be affected unless, and until, ESMA’s proposals become rules. We will let you know well in advance of any changes to your account.

If you’d like to speak to someone about this in more detail, our highly trained client support team will be happy to assist you on 0800 409 6789 or at helpdesk.uk@ig.com. They’re available 24 hours a day from 8am Saturday to 10pm Friday.

Thank you in advance for sharing your views. With your help, we can ensure the industry is fair to all.

Kind regards

Peter Hetherington

CEO
 

timsk

Legendary member
6,957 1,819
Like cbrads, I've just received the same e-mail from IG and it's very clear they think that ESMA's proposals include spread betting. Yes, it's possible that they're mistaken but, given the changes will impact their business massively, it strikes me that the CEO would have checked and double checked the facts before e-mailing IG's entire client base.
Tim.
 
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kalott

Established member
677 57
"ESMA is currently discussing
whether CFDs on cryptocurrencies, whose underlying assets have displayed very high price variation, should be addressed in the measures and whether a 5:1 initial leverage would provide investors with sufficient protection. Alternatively, a lower leverage limit (2:1 or 1:1) or stricter measures (such as a prohibition on the marketing, distribution or sale of CFDs in cryptocurrencies to retail clients) could be considered."

https://www.leaprate.com/forex/regulations/esma-cfd-trading-rules-crypto-leverage-limit/


is this a revenge for brexit ;)
 

tomorton

Legendary member
7,250 969
Nice that IG are being pro-active and contacting their clients. I have suggested to LCG they could do likewise but they won't yet say whether they will or won't, nor whether they will do anything but wait for the ESMA decision. Not very encouraging.

If contacted for my opinion on these proposed leverage rates I would have to say I would close my account immediately they became mandatory, no point continuing.
 

mike.

Senior member
2,098 701
Nice that IG are being pro-active and contacting their clients. I have suggested to LCG they could do likewise but they won't yet say whether they will or won't, nor whether they will do anything but wait for the ESMA decision. Not very encouraging.

If contacted for my opinion on these proposed leverage rates I would have to say I would close my account immediately they became mandatory, no point continuing.
What would be the alternative if you still wanted a reasonable size leverage ? Some of the uk brokers have offices outside the EU, Does it apply to where the broker is situated or the client ?
 

tomorton

Legendary member
7,250 969
I don't like the risk of trading with a company not regulated in the UK.

I suppose I'll have to go to DMA with a UK broker if SB is effectively closed down.

What do other people think they will do?
 

mike.

Senior member
2,098 701
spoze we will have to wait and see the outcome of the esma debate, Roll on Brexit...