Potential mass exodus from Spreadbetters.

timsk

Legendary member
6,957 1,817
Latest e-mail from IG's CEO . . .

#ReplytoESMA on your new feedback site

Dear Mr. Wilcox

We recently emailed you to highlight ESMA leverage proposals which, if implemented, would see margins for retail traders increase to 3.33% on EUR/USD, 5% on the DAX, and 20% on equities.

The response we have received from our clients across Europe has been overwhelming. On receiving such feedback against these leverage proposals, we have set up a new website – replytoESMA.trading – so the scale of the dissatisfaction with Europe's regulator will be more visible.

We have received over 3000 replies so far – and counting. We are in the process of uploading them anonymously to the site (aside from opt-outs). If you have not commented on these proposals yet, please visit replytoESMA.trading by 5 February to add your views and read other traders’ replies.

Information about ESMA’s margin close-out proposal

In addition to the leverage restrictions detailed in our previous email, ESMA is suggesting a 50% margin close-out rule on a position-by-position basis. This is a drastic change to the current system where we look at positions together at 'account level', and means traders will be in danger of having positions closed out early – even if their overall strategy is in profit.

So if any single position runs a loss to half the initial margin, that position will have to be closed. For example if the initial margin to open a Germany 30 trade was €2000, that position would have to be closed by IG when there was a loss of €1000 (50% of €2000), irrespective of profits on other positions. IG feels this is not sensible.

You can read all the proposals in full here.

How will this proposal affect your trading?

While we support many of ESMA’s suggestions, we believe that the position-by-position close-out model could prove harmful to balanced trading strategies. We feel that an account-level approach is far more appropriate.

Here are two examples:

● Say you have a long Dow Jones position and a short DAX position. You’ll risk having one position closed out if losses reach 50% of your initial margin on that position, even if you are in profit on your overall strategy. This is because ESMA’s proposal disregards profits on other positions and indeed the success of your overall strategy. This could result in unnecessary extra costs, as you may need to re-establish one leg of your strategy after it is closed out.

● Imagine you have a short CFD position on the FTSE 100, to hedge a long portfolio held elsewhere. If the losses on your short FTSE 100 CFD reach 50% of your initial margin, your position would be closed. This is because ESMA suggest that even if you have enough funds in your CFD account to keep your hedging position open, your provider must close it at the 50% level. This could increase your overall risk and your end costs, as you may need to re-establish your hedge by reopening the short FTSE 100 CFD position after it’s been closed out.


Reply to ESMA now

You can respond to this proposal on the margin close-out page of your new ReplytoESMA site. We will submit all responses to ESMA on your behalf. You can also reply to the leverage proposals from here, and read trader and industry responses from across Europe.

Have your say

Please note that if you respond in this way, your comments may be published anonymously on the website.

We’d strongly encourage you to share your views on this proposal, as ESMA will shape its final decision according to the feedback it receives. The deadline for responses is 5 February.

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

T 0800 409 6789
E helpdesk.uk@ig.com
community.ig.com

#ReplytoESMA.trading

IG.com
 

gerryg

Established member
900 6
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.

Deleveraging is simply increasing resilience of you trading bets to volatility what is direct measure of risk. Decreasing potential risk is bad in your opinion?
 

wackypete2

Legendary member
10,180 2,035
● 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


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
You guys have it easy compared to the AWFUL margins here in the USA.

Peter
 

mike.

Senior member
2,098 701
Just out of interest, I spoke to IC markets this week.

Accept uk clients
full list of indices.
up to 500/1 leverage
No EU regulation
based and regulated in oz.

At least all is not lost if the ruling goes the wrong way.
 
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sminicooper

Experienced member
1,148 326
Latest e-mail from IG's CEO . . .

#ReplytoESMA on your new feedback site

Dear Mr. Wilcox

We recently emailed you to highlight ESMA leverage proposals which, if implemented, would see margins for retail traders increase to 3.33% on EUR/USD, 5% on the DAX, and 20% on equities.

The response we have received from our clients across Europe has been overwhelming. On receiving such feedback against these leverage proposals, we have set up a new website – replytoESMA.trading – so the scale of the dissatisfaction with Europe's regulator will be more visible.

We have received over 3000 replies so far – and counting. We are in the process of uploading them anonymously to the site (aside from opt-outs). If you have not commented on these proposals yet, please visit replytoESMA.trading by 5 February to add your views and read other traders’ replies.

Information about ESMA’s margin close-out proposal

In addition to the leverage restrictions detailed in our previous email, ESMA is suggesting a 50% margin close-out rule on a position-by-position basis. This is a drastic change to the current system where we look at positions together at 'account level', and means traders will be in danger of having positions closed out early – even if their overall strategy is in profit.

So if any single position runs a loss to half the initial margin, that position will have to be closed. For example if the initial margin to open a Germany 30 trade was €2000, that position would have to be closed by IG when there was a loss of €1000 (50% of €2000), irrespective of profits on other positions. IG feels this is not sensible.

You can read all the proposals in full here.

How will this proposal affect your trading?

While we support many of ESMA’s suggestions, we believe that the position-by-position close-out model could prove harmful to balanced trading strategies. We feel that an account-level approach is far more appropriate.

Here are two examples:

● Say you have a long Dow Jones position and a short DAX position. You’ll risk having one position closed out if losses reach 50% of your initial margin on that position, even if you are in profit on your overall strategy. This is because ESMA’s proposal disregards profits on other positions and indeed the success of your overall strategy. This could result in unnecessary extra costs, as you may need to re-establish one leg of your strategy after it is closed out.

● Imagine you have a short CFD position on the FTSE 100, to hedge a long portfolio held elsewhere. If the losses on your short FTSE 100 CFD reach 50% of your initial margin, your position would be closed. This is because ESMA suggest that even if you have enough funds in your CFD account to keep your hedging position open, your provider must close it at the 50% level. This could increase your overall risk and your end costs, as you may need to re-establish your hedge by reopening the short FTSE 100 CFD position after it’s been closed out.


Reply to ESMA now

You can respond to this proposal on the margin close-out page of your new ReplytoESMA site. We will submit all responses to ESMA on your behalf. You can also reply to the leverage proposals from here, and read trader and industry responses from across Europe.

Have your say

Please note that if you respond in this way, your comments may be published anonymously on the website.

We’d strongly encourage you to share your views on this proposal, as ESMA will shape its final decision according to the feedback it receives. The deadline for responses is 5 February.

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

T 0800 409 6789
E helpdesk.uk@ig.com
community.ig.com

#ReplytoESMA.trading

IG.com
I'm starting to get the impression that IG are more worried about potential changes than I am.
 

tomorton

Legendary member
7,250 969
Just out of interest, I spoke to IC markets this week.

Accept uk clients
full list of indices.
up to 500/1 leverage
No EU regulation
based and regulated in oz.

At least all is not lost if the ruling goes the wrong way.

"International Capital Markets hold an Australian financial services licence (AFSL) No. 335692 and is Authorised to carry on a financial services business in Australia, limited to the financial services covered by our AFSL."

Are they regulated by the UK FCA?
 

mike.

Senior member
2,098 701
"International Capital Markets hold an Australian financial services licence (AFSL) No. 335692 and is Authorised to carry on a financial services business in Australia, limited to the financial services covered by our AFSL."

Are they regulated by the UK FCA?
As far as i know Tom, just regulated by australian regulators like you mention, No FCA or ESMA regulation...I may be wrong.
 

f2calv

Experienced member
1,317 277
I'm starting to get the impression that IG are more worried about potential changes than I am.
Agreed! In anticipation of a rocky road ahead I sold my IGG shares on Thursday.
I feel their profitability is going to take a bit of a hit regardless of their attempts to focus on high net worth individuals.
 
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timsk

Legendary member
6,957 1,817
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sminicooper

Experienced member
1,148 326
" The stock price of fellow online brokerage Gain Capital increased by about 26% after it announced last month that it was adding new bitcoin derivative instruments to City Index, its UK FCA regulated brand."

https://news.bitcoin.com/strong-cryptocurrency-cfd-volumes-bring-record-revenues-for-plus500/
I can well understand that – should be even more profitable for them than conventional spread betting. I'll be interested to see what happens to their share price if and when the new regulations kick in.
 

mike.

Senior member
2,098 701
IG are saying that the majority of their revenue comes from high capital professional traders and the new proposed regulation wont have that much impact on on their business. TBH I think their telling porky's, trying to keep "the stiff upper lip" but are actually in fact bricking themselves along with CMC and 99% of other european brokers..And rightly so.
 

sminicooper

Experienced member
1,148 326
IG are saying that the majority of their revenue comes from high capital professional traders and the new proposed regulation wont have that much impact on on their business. TBH I think their telling porky's, trying to keep "the stiff upper lip" but are actually in fact bricking themselves along with CMC and 99% of other european brokers..And rightly so.
Yes – I'm also curious about IG 's motives. Having initially been sent emails and start-up nag-screens explaining the dire consequences, I eventually completed their online survey with my reasoned comments etc. Since then I've been continually bombarded with encouragement to engage in further ways to provide "evidence" to ESMA – and also been encouraged to apply for "professional status".

If IG's majority of revenue comes from high capital professional traders then why are they so interested in me – a tiny minnow (admittedly I've taken a few bob off them). One of the points I raised to them is my suspicion that if the new regulations are very restrictive then it will just encourage a lot of their small traders to open accounts with foreign-based and lightly regulated brokers. My understanding is that if 80% of their customers don't trade profitably then presumably that's a nice little earner for IG. So if a lot of the punters up sticks and go elsewhere then it doesn't look too good for the likes of IG – and I can well understand their point of view.

As for meddling from the government/ESMA and other authorities that know what's good for us – I just wish they would leave well alone and concentrate on doing something worthwhile. The derivatives and spread betting market is self regulating isn't it? – If you screw up then you lose your money, and if you screw up big time you can lose a lot more than that. When oh! when for goodness sake, can we get the Nanny State off our backs?
 

tomorton

Legendary member
7,250 969
IG should do well out of the proposed ESMA regulatory action. When regulations get tighter in any industry, this is less onerous on the larger players, while heavier on the smaller ones, who are less well financed and possibly offering particularly narrow ranges of services. Its also more onerous on new competitors as their start-up costs will now be higher and their initial investment pay-back period extended, while the very fact the regulators are active in a particular industry increases the risk they will go further along the same road. It even increases the % possibility of a total ban on certain activities, especially if earlier regulatory tightening has already shrunk the sector and its economic and constituent importance.

But none of this means that IG want ESMA to get involved, it doesn't mean we should ignore IG or that the risk to us small timers is exaggerated. My response to ESMA will go in this weekend, then its fingers crossed.
 

sminicooper

Experienced member
1,148 326
IG should do well out of the proposed ESMA regulatory action. When regulations get tighter in any industry, this is less onerous on the larger players, while heavier on the smaller ones, who are less well financed and possibly offering particularly narrow ranges of services. Its also more onerous on new competitors as their start-up costs will now be higher and their initial investment pay-back period extended, while the very fact the regulators are active in a particular industry increases the risk they will go further along the same road. It even increases the % possibility of a total ban on certain activities, especially if earlier regulatory tightening has already shrunk the sector and its economic and constituent importance.

But none of this means that IG want ESMA to get involved, it doesn't mean we should ignore IG or that the risk to us small timers is exaggerated. My response to ESMA will go in this weekend, then its fingers crossed.
I understand that and it all seems to make sense. What I'm really curious about is, how profitable are the small-time spread bettors to firms like IG? It just seems to me that the proposed regulations are all about damping down their activity. I have no proper information on this topic and am therefore only guessing – does someone else know for sure?