New ESMA REGULATION
In August 2018, the European Securities and Markets Authority (ESMA) will be introducing new regulations across the leveraged trading industry.
Here you can find out about these new rules and how they will affect your financial trading with Spreadex.
What are the new rules?
ESMA's new rules will only affect Retail Clients. If you are classified as a Professional Client then these rules will not apply to you. You may be eligible to qualify for Professional Client status. To find out more about this either log into your account online or contact us at [email protected].
ESMA's new rules include:
- Binary Options - a prohibition on the marketing, distribution or sale of binary options;
- Leverage Restrictions - maximum leverage limits on opening new CFD or financial spread betting positions;
- Margin Close Out Rule - a margin close-out rule on a 'per account' basis set at a minimum of 50% of initial margin;
- Negative Balance Protection - negative balance protection for all retail clients.
How will these rules affect me?
From Wednesday the 1st of August you will notice some changes when you log into our online platform and mobile apps. You will be a given a new Limited Risk Account for all new trades. This account will give you new protections meaning that even in the event of a large market shock, you can not end up with a negative balance.
Due to the leverage restrictions, however, you will now need to deposit more funds in order to place new trades. The new close-out rule will also mean that, in the event of your positions deteriorating, they will be closed out earlier than under the current system.
What are the leverage restrictions?
In August, ESMA will be introducing the following minimum initial margin requirements for retail clients:
* Currency pairs containing any two of the following: USD, EUR, JPY, GBP, CAD, CHF
**All other currency pairs
† FTSE 100, France 40, Germany 30, EU Stocks 50, Wall Street, US 500, US Tech 100, Japan 225, Australia 200
‡ All other indices and commodities
WHAT ABOUT MY EXISTING TRADES?
Any trades already open before the introduction of the new rules will remain on their existing margin rates. If you have existing positions you will be able to easily switch between your old account (Legacy Account) and your new Limited Risk Account on our platform and mobile apps. Both accounts can be accessed with your current username and password.
Existing positions will however be subject to a new close out rule in line with the ESMA proposals, this rule is covered further down this page.
You can edit stops and limits or close positions on your Legacy Account, however, all new trades must now be placed on your new Limited Risk Account.
WHAT IS THE NEW CLOSE OUT RULE?
ESMA require us to change our current close out rule such that clients’ positions are closed earlier should they start to decrease in value. To comply with these requirements we are updating our terms and conditions and clients will be asked to agree to these new terms by 01/08/2018 at the latest.
Under the new terms, should your Available Balance fall below zero, one or more of your financial positions may be at risk of being closed out. To keep positions open in these circumstances we would encourage you to deposit further funds into your account.
IS THIS THE SAME FOR MY EXISTING POSITIONS?
Yes, our new close out rule will be universally applied to all financial positions once the new terms have been agreed. This means that existing positions on your Legacy Account will also be subject to the new rule, however, we will use any unencumbered funds on your Limited Risk Account to support existing positions on your Legacy Account.
DO MY EXISTING POSITIONS RECEIVE THE NEGATIVE BALANCE PROTECTION?
No, any existing positions on your legacy account will not receive the negative balance protection. This means that you can lose more than you have deposited and will be liable for any debt resulting from these positions.
WHAT ABOUT SPORTS BETTING?
Your Legacy Account can still be used to place sports bets on our sports betting platforms. Sports spread-betting is unaffected by these rules and our sports betting products will remain unchanged. Please note that when placing sports spread-bets on your Legacy Account you will not have a negative balance protection.
What happens to my credit limit?
Credit limits will be removed on new Limited Risk Accounts. Any trades opened on these accounts will have to be supported by cash deposits, realised profits or in-running profits from open positions.
If you have a credit limit on your existing account this will remain in place and can be used to support either existing financial trades or place sports trades.
Will any products be removed?
Yes, Binary Options and Speed Bets will no longer be available on Limited Risk Accounts. Only Professional clients will be able to trade these products.
Can I use stops to reduce my initial margin (ntr)?
No, we are required by ESMA to enforce their leverage guidelines and therefore any reductions in margin by the use of stops would compromise this.
Stops are still an important tool to be used to control risk and safely trade the markets, they just won’t reduce your margin in the process.
CAN I BECOME A PROFESSIONAL CLIENT?
If you would like to continue trading on our old lower margins rates you can apply to become a Professional Client. To do so, log into your account online, visit the Account Summary page in My Account and launch the Professional Client Application Form at the bottom of the page. Alternatively you can email us at [email protected] or call our Customer Service Team on +44 1727 895 000.
Please be aware that whilst Professional Clients may trade with lower margin rates, they will not receive negative balance protection on their accounts.
