Sharky
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We want to help raise awareness about a consultation paper, produced by the EMSA (European Securities and Markets Authority), proposing changes on CFDs and binary options that would affect retail investors across the EU. The ESMA has invited comment on it's proposals and in particular for specific questions which are summarised in Chapter 4 of consultation paper (and reproduced below).
What are the proposals?
The proposals are aimed at retail investors only, most of which are designed to increase conduct standards across the industry. These are sensible and should be supported. More controversially, there are proposed restrictions to leverage, which you may or may not agree with, but which could have an impact on your ability to trade. ESMA has proposed introducing leverage limits of 30:1 to 5:1 on retail trading. The proposals would increase the margin required to open a CFD trade or (spread bet - can anyone confirm this?) on EUR/USD to 3.33%, the DAX to 5%, and equities to 20%.
You can read the full proposals here:
https://www.esma.europa.eu/sites/de...easures_on_cfds_and_bos_to_retail_clients.pdf
When do I need to respond by?
ESMA will consider all comments received by 5th February 2018.
How can I submit my comments?
As described here: https://www.esma.europa.eu/press-ne...ntial-product-intervention-measures-contracts you can submit directly to the ESMA through a dedicated email address: [email protected]
Alternatively IG have set up a brand-neutral website called #ReplytoESMA at http://replytoesma.trading. Obviously brokers like IG would be adversely affected by the proposals so it's important to be mindful that they're pursuing their own interests. Nevertheless we support raising awareness of these propsoals and how the website makes it easy to respond.
What are the specific questions?
A: Do you think that ESMA has adequately identified the instruments in the scope of its possible measures?
B: What impact do you consider that the introduction of leverage limits on the basis described above (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
C: What impact do you consider that the introduction of a margin close-out rule on a perposition basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
D: What impact do you consider that the introduction of negative balance protection on a peraccount basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
E: What impact do you consider that a restriction on incentivisation of trading (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
F: What impact do you consider that a standardised risk warning (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
G: Please provide evidence on the proportion of retail clients that use these products for hedging purposes and how the suggested measures will affect them.
H: What impact do you consider that a prohibition on providing binary options to retail clients would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
I: What impact do you consider that the envisaged measures would have on retail investors?
J. Do you believe that specific restrictions concerning CFDs in cryptocurrencies should be introduced? In particular, what impact do you consider that assigning a leverage limit of 5:1 to such CFDs would have on firms’ business and / or any expected additional benefits for retail clients? How would such an impact compare to that from the possible alternatives of lower leverage limits such as 2:1 or 1:1, or a prohibition on the sale, marketing and distribution of such CFDs? Please describe and explain any one-off or ongoing costs or benefits
What are the proposals?
The proposals are aimed at retail investors only, most of which are designed to increase conduct standards across the industry. These are sensible and should be supported. More controversially, there are proposed restrictions to leverage, which you may or may not agree with, but which could have an impact on your ability to trade. ESMA has proposed introducing leverage limits of 30:1 to 5:1 on retail trading. The proposals would increase the margin required to open a CFD trade or (spread bet - can anyone confirm this?) on EUR/USD to 3.33%, the DAX to 5%, and equities to 20%.
You can read the full proposals here:
https://www.esma.europa.eu/sites/de...easures_on_cfds_and_bos_to_retail_clients.pdf
When do I need to respond by?
ESMA will consider all comments received by 5th February 2018.
How can I submit my comments?
As described here: https://www.esma.europa.eu/press-ne...ntial-product-intervention-measures-contracts you can submit directly to the ESMA through a dedicated email address: [email protected]
Alternatively IG have set up a brand-neutral website called #ReplytoESMA at http://replytoesma.trading. Obviously brokers like IG would be adversely affected by the proposals so it's important to be mindful that they're pursuing their own interests. Nevertheless we support raising awareness of these propsoals and how the website makes it easy to respond.
What are the specific questions?
A: Do you think that ESMA has adequately identified the instruments in the scope of its possible measures?
B: What impact do you consider that the introduction of leverage limits on the basis described above (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
C: What impact do you consider that the introduction of a margin close-out rule on a perposition basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
D: What impact do you consider that the introduction of negative balance protection on a peraccount basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
E: What impact do you consider that a restriction on incentivisation of trading (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
F: What impact do you consider that a standardised risk warning (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
G: Please provide evidence on the proportion of retail clients that use these products for hedging purposes and how the suggested measures will affect them.
H: What impact do you consider that a prohibition on providing binary options to retail clients would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
I: What impact do you consider that the envisaged measures would have on retail investors?
J. Do you believe that specific restrictions concerning CFDs in cryptocurrencies should be introduced? In particular, what impact do you consider that assigning a leverage limit of 5:1 to such CFDs would have on firms’ business and / or any expected additional benefits for retail clients? How would such an impact compare to that from the possible alternatives of lower leverage limits such as 2:1 or 1:1, or a prohibition on the sale, marketing and distribution of such CFDs? Please describe and explain any one-off or ongoing costs or benefits
