New ESMA Regulation
In March, the European Securities and Markets Authority (ESMA) announced having agreed on a range of measures intended to harmonise EU-wide regulation and to provide better protection to retail clients trading leveraged products, like CFDs.
Read the full ESMA statement here
Overview of measures
Leverage limits on new positions
50% margin close-out rule on an account-level basis
Negative balance protection limiting client losses
Prohibition on benefits used to incentivise trading
Standardised warning statement of the risks involved across promotional material
Prohibition on the marketing, distribution or sale of binary options regardless of type
Measures in detail
Leverage limits will apply to trades and take into consideration the volatility of the underlying market. Initial margin requirements will increase on CFD and FX products, meaning the amount of cash you initially need available to fund a leveraged trade will be higher.
As an example, the initial margin requirement on non-major FX pairs will go from our current 2% margin rate (50:1 leverage) to 5% (20:1).
|Saxo Current||ESMA Initial Margin|
Margin close out
This will standardise the percentage of margin clients must maintain before providers are required to close out client positions.
The proposed rate is 50% of minimum initial required margin on an account-level, meaning if the total margin in your account falls to 50% of minimum initial margin required, then positions will be closed out.
Negative balance protection
Providers must provide negative balance protection on a per account basis which is designed to provide an overall guaranteed limit on potential losses incurred by retail clients.
Restriction on incentives
Restrictions will be placed on promotions offering excessive bonuses or other incentives to attract and encourage retail investors to invest in FX/CFDs.
Harmonised Risk Warning with firm-specific performance
A standardised format for risk warnings will be introduced, where firms will have to include information on the amount of leveraged trades which resulted in positive outcomes for their clients.
All binary options, regardless of whether they are traded OTC or listed on a trading venue, fall within the scope of the agreed measure. and as such we will no longer be offer one-touch and no-touch options to EU-domiciled retail clients.
Saxo has always been an advocate of responsible trading and we support the measure set forth by ESMA.