Respond to the ESMA proposals

Sharky

Staff member
Nov 4, 2000
5,399
250
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www.trade2win.com
#1
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: CFECFDBO@esma.europa.eu

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
 

Sharky

Staff member
Nov 4, 2000
5,399
250
143
42
www.trade2win.com
#5
Thanks Jason101 for the bump. Just to confirm you have until the end of today (Mon, 5th Feb) to send in your feedback. The #ReplyToESMA shows the cut off as 10pm UK time (11pm CET).
 
Likes: Sonicscooter

tomorton

Well-known member
Feb 28, 2002
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Exeter
#8
Well done to the 98%.

Has anyone else seen the suggestion to LCG SB clients that they can apply for professional account status?
 

cbrads

Well-known member
Mar 11, 2014
1,159
252
93
NW England
#9
Well done to the 98%.

Has anyone else seen the suggestion to LCG SB clients that they can apply for professional account status?
What's the criteria at LCG to be considered professional? At IG they expect you to have at least 1 year's experience in the finance industry or have 1/2 mil in readies...
 

tomorton

Well-known member
Feb 28, 2002
7,051
916
173
62
Exeter
#10
So far I see you need to show "necessary level of experience and knowledge to understand the risks involved in relation to any such service or transactions, or types of transaction or product."

I guess other T&C will become apparent if you contact them direct or start through the application process. Not there yet.

Wondering particularly about income tax implications, negative balance and deposit protection but other issues might be important.
 

NVP

Well-known member
Jun 21, 2004
35,786
1,732
223
west sussex, UK
fxcorrelator.com
#14
Hmmmmm......there’s a surprise

I have had to take a step back from this one as it was making my blood boil so much.....

my personality displays an extreme resistance to authority in areas where I deem their involvement is invasive and excessive and unfair .......like this

Oh well.....on with the show......

N
 

NVP

Well-known member
Jun 21, 2004
35,786
1,732
223
west sussex, UK
fxcorrelator.com
#15
I will,have a chat with my preferred brokers ....

I really cannot and will not deposit significantly more money with brokers to cover margins I have never used ......and frankly the new rules do not exactly make me feel more optimistic forwards the future survival of some of the brokers concerned ....so giving them more of my hard earned money does not fill me with confidence .....guarantees don’t pay the rent in the real world ......so don’t ever be fooled by over regulation .....

I wonder if the FCA would relax these new rules after we leave Europe ?.....can we live in hope ?

N