Regulators cracking down on trading leverage? | Forex Factory

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Regulators cracking down on trading leverage?

  • #1
  • First Post: Edited 5:21am Dec 10, 2018 5:09am | Edited 5:21am
Hi there

I am in Australia, and I had IG (Australia) call me today about opening a pro account so that I can be treated as a 'wholesaler investor'. The crux of the offer is that they said recently in Europe CFD leverage for various things got slammed and it went down to 30:1 or 20:1 or whatever - whereas IG in Australia have 200:1 for forex for example (for major pairs). Anyway, they said they are assuming the same is going to happen here down under soon, and as a wholesale investor I won't be subject to the same limitations, etc.

This is no good for me of course, I wouldn't qualify to be a pro trader income wise, as one needs to have made over 250k pa for the last 2 years.

So I want to ask more experienced traders here - what happens if the regulators here do crack down on this? What are our options? Trading on 30:1 or 20:1 is pointless I think, but I see many brokers who claim to be regulated in Europe, etc do like 500:1 or even 1000:1. How can they do this?

Would it be possible for me as an Australian to get an account with a broker overseas and enjoy these high leverage ratios, regardless of what regulators decide to screw up here? I don't really care where they are regulated or if at all, so long as they have a good reputation.

How does one generally withdraw money from foreign brokers and what sorts of charges are involved?

PS. If anyone can make any recommendations of brokers who they've found good (that meet this criteria), let me know !

Thanks
  • #2
  • Dec 11, 2018 4:51am Dec 11, 2018 4:51am
Maybe check with Jason on the FXCM thread. He's pretty clued up with this sort of thing.

Its backwards if you ask me. Pro's with tons of funds probably don't use leverage. Whereas the learners need it. It seems like this crack down is hurting the learners more than the pro's.
Why is a Raven like a Writing Desk?
  • #3
  • Dec 11, 2018 12:36pm Dec 11, 2018 12:36pm
Quoting Starcraftmaz
Hi there I am in Australia, and I had IG (Australia) call me today about opening a pro account so that I can be treated as a 'wholesaler investor'. The crux of the offer is that they said recently in Europe CFD leverage for various things got slammed and it went down to 30:1 or 20:1 or whatever - whereas IG in Australia have 200:1 for forex for example (for major pairs). Anyway, they said they are assuming the same is going to happen here down under soon, and as a wholesale investor I won't be subject to the same limitations, etc. This is no good...
This is exactly what the people in Europe are doing now opening accounts with Australian brokers too escape ESMA,but i got told that ESMA have closed down Skrill/neteller and Visa/mastercard deposits atleast for FBS by people from Europe.I am from south america so it doesnt concern me,i dont think you need to worry abaut leverage change in Australia soon because all europeans have gone from eouropean brokers to Australian brokers to still get leverage and that means a lot of buissnes and taxes for Australian gowerment and even binary options are still legal in Australia and that would be the first to go.
  • #4
  • Dec 11, 2018 9:12pm Dec 11, 2018 9:12pm
Yes, I even heard that Visa/Mastercard is planning to stop working with forex brokers. One thing about overseas brokers is that the regulation is not as solid, which is a thing that's important for traders since it concerns the validity and reliability of that broker.
  • #5
  • Dec 14, 2018 11:00am Dec 14, 2018 11:00am
Quoting FXFcr
Yes, I even heard that Visa/Mastercard is planning to stop working with forex brokers. One thing about overseas brokers is that the regulation is not as solid, which is a thing that's important for traders since it concerns the validity and reliability of that broker.

Visa & Mastercard will apply their new rules only to unregulated brokers, based in offshore territories.

https://www.financemagnates.com/fore...pain-offshore/

https://www.financemagnates.com/fore...-brokers-icos/
  • #6
  • Dec 15, 2018 5:01am Dec 15, 2018 5:01am
Quoting redoktober
{quote} Visa & Mastercard will apply their new rules only to unregulated brokers, based in offshore territories. https://www.financemagnates.com/fore...pain-offshore/ https://www.financemagnates.com/fore...-brokers-icos/
They already capped leverage making forex low-risk investments, still they want more. Want to deprive us earning opportunities, take away financial freedom. I hope that forex industry will adapt and brokers will follow all requirements to continue providing their excellent services to us.
  • #7
  • Dec 16, 2018 9:57am Dec 16, 2018 9:57am
Quoting dispersion
{quote} They already capped leverage making forex low-risk investments, still they want more. Want to deprive us earning opportunities, take away financial freedom. I hope that forex industry will adapt and brokers will follow all requirements to continue providing their excellent services to us.
More in general , the problem is the europe and its bureaucrats.

The Euro-bureaucrats of ESMA are a shameful and disgusting fact.
They take very high salaries to do nothing, while the young Europeans guys are unemployed.
Euro-bureaucrats are not elected by anyone and have no responsibility if they are wrong.

They were put in their place only for political recommendations, without having any merit or professionalism.
Euro-bureaucrats are dirty parasites that impose sacrifices on European citizens, while they have incredible privileges.

They are dinosaurs that steal their fabulous salary, approving hallucinating and useless laws such as those on the diameter of peas, the curvature of cucumbers and the length of the bananas : and the poor European peoples must obey !

And here is their latest invention: a law that will ruin retail Forex. Obviously they received precise orders from the Strong Powers, from Big Players and from the Great Old Men who command in Europe and in the World. This is not conspiracy , this is the reality.
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  • #8
  • Dec 16, 2018 4:50pm Dec 16, 2018 4:50pm
Leverage on a CL contract ranges from 10-20x depending on price level and changing margin. That makes it an expensive contract on paper, but based on $ value of volatility, you need real money to trade it. I don't want more leverage to cheapen the entry level on CL.... I wouldn't go near it with only $4500 margin as starting capital and implied 13x leverage at current pricing.

So, why do you need 200-500x leverage on retail FX? You just don't need it to make money. Unless you don't have much money to begin with. Maybe stop blaming everyone else for not having enough stating capital. Speculation isn't a right of all humans. If someone only has $2000 to trade with, well, too bad for them, make do. Maybe it just isn't enough. The universe is not a fair place. No one owes you anything. Focus less on the potential leveraged outcome, and focus more on the process... the rewards will come.

ps, I do not like big gvt or bureaucracy either. But I take responsibility for my situation in life and I don't blame others.
  • #9
  • Dec 24, 2018 5:02am Dec 24, 2018 5:02am
Germany’s financial regulator BaFin plans to apply permanently ESMA’s CFD trading restrictions on a national level. The decision is intended as a protective measure for retail investors which will take effect in 2019.

In its official notice the German financial watchdog clarified that it aims to “permanently match the level of protection in Germany to the temporary product intervention measure issued by ESMA.” This is partly done to prevent attempts to evade these measures by providers from other EU countries. Another reason is that the ESMA can only apply such product intervention measures on a temporary basis.
  • #10
  • Dec 26, 2018 5:55pm Dec 26, 2018 5:55pm
Hi, at the onset, let me take an opportunity to thanks all the traders for prompt and posiyive replies.. my today's query is "what happens if broker closes all your open positions within 1 minute of market opens after 3 days of holiday and you dont get chance to credit additional margin in yr account and experienced a huge loss".. how can we fight with broker on this?
  • #11
  • Dec 26, 2018 9:00pm Dec 26, 2018 9:00pm
Quoting Tush1112
Hi, at the onset, let me take an opportunity to thanks all the traders for prompt and posiyive replies.. my today's query is "what happens if broker closes all your open positions within 1 minute of market opens after 3 days of holiday and you dont get chance to credit additional margin in yr account and experienced a huge loss".. how can we fight with broker on this?
I hope this is not a real experience of yours bro, if it is, I'm sorry for your loss. If your broker is a true ECN broker I don't think we can fight with the broker since this is a market move. All I can say is keep the ratio of your balance and opened positions to a safe level, or stick with SL so you won't be open to the risk of a blown account.
  • #12
  • Dec 27, 2018 3:36am Dec 27, 2018 3:36am
Quoting FXFcr
{quote} I hope this is not a real experience of yours bro, if it is, I'm sorry for your loss. If your broker is a true ECN broker I don't think we can fight with the broker since this is a market move. All I can say is keep the ratio of your balance and opened positions to a safe level, or stick with SL so you won't be open to the risk of a blown account.
Thanks mate.. yes its a real experience, actually they have closed my positions on the rate (on the exact bottom price) which was not even flashed on the screen or on the board at that time.. now they are saying that concern department is investigating the same and will update soon...
  • #13
  • Dec 27, 2018 7:00pm Dec 27, 2018 7:00pm
Quoting Tush1112
{quote} Thanks mate.. yes its a real experience, actually they have closed my positions on the rate (on the exact bottom price) which was not even flashed on the screen or on the board at that time.. now they are saying that concern department is investigating the same and will update soon...
Update us with the outcome mate
  • #14
  • Dec 30, 2018 10:13am Dec 30, 2018 10:13am
Quoting Tush1112
{quote} Thanks mate.. yes its a real experience, actually they have closed my positions on the rate (on the exact bottom price) which was not even flashed on the screen or on the board at that time.. now they are saying that concern department is investigating the same and will update soon...

When the market opens spreads can be much larger, which you wont be able to identify on your chart, unless you have an indicator setup to monitor the live spread.
Learn, a forex trader must, unlearn and relearn he will.
  • #15
  • Dec 30, 2018 11:09am Dec 30, 2018 11:09am
If all Australian brokers also will need to lower leverage do too new regulations there we still have Coinexx/finpro with 2 dollars pr lot roundturn and small spreads but i am safer with my current broker FP markets and as IB i get 4 dollars pr lot roundturn and they can close as many deposits as the want to because with coinexx/finpro you can deposit with bitcoin so either way they are not taking away my possibility to trade with high leverage
  • #16
  • Dec 30, 2018 2:46pm Dec 30, 2018 2:46pm
Quoting dmn008
So, why do you need 200-500x leverage on retail FX? You just don't need it to make money. Unless you don't have much money to begin with. Maybe stop blaming everyone else for not having enough stating capital.
It is not only about capital. For certain strategies you just have to have high leverage, otherwise the returns will be tiny. And I'm talking about scalping strategies with fairly rare and very short-term trades with a low drawdown. So, while trading with a 1:300 - 1:400 leverage I take risks similar to those taken by a long-term trader with a 1:50 - 1:100 leverage. Here, by trading with leverage I mean fully utilizing it.

And I'm not asking to give me the highest leverage or nothing. The European bureaucrats could have agreed to a middle ground like a 1:100 - 1:200 leverage, which would have been totally OK for me. But they had to go with 1:20 - 1:30, which is unacceptable. I hope ASIC won't follow suit.

Luckily, there are overseas branches of UK/EU brokers that don't mess with leverage.
  • #17
  • Dec 30, 2018 7:07pm Dec 30, 2018 7:07pm
Quoting Trivion
Luckily, there are overseas branches of UK/EU brokers that don't mess with leverage.
Can you suggest any? I'd like to note them down for the future just in case.
  • #18
  • Dec 31, 2018 7:56am Dec 31, 2018 7:56am
Quoting Starcraftmaz
{quote} Can you suggest any? I'd like to note them down for the future just in case.
Sure.
First of all, I would recommend FXOpen (.com) It is my main broker now. I've been trading with FXOpen for 6+ years. They also have UK and AU branches. I'd had an account with their UK branch as well until recently, but I completely moved to the offshore branch for leverage reasons.

Besides, Tickmill is an okayish choice. They also have regulated branches. I have a small experimental account with them. But since their spreads during rollover are awful, most of my EAs don't work too well there. If you don't care too much about this issue, than Tickmill is a good choice.

As a general rule of thumb, look at offshore brokers that have regulated entities in strong jurisdictions, like Australia and the UK, under the same brand. And those who have been around in the industry for a long time.
  • #19
  • Jan 2, 2019 5:37am Jan 2, 2019 5:37am
Quoting Starcraftmaz
Hi there I am in Australia, and I had IG (Australia) call me today about opening a pro account so that I can be treated as a 'wholesaler investor'. The crux of the offer is that they said recently in Europe CFD leverage for various things got slammed and it went down to 30:1 or 20:1 or whatever - whereas IG in Australia have 200:1 for forex for example (for major pairs). Anyway, they said they are assuming the same is going to happen here down under soon, and as a wholesale investor I won't be subject to the same limitations, etc. This is no good...

Put some more cash (i.e. margin) and feel free to open bigger lots, earning more in absolute profit. They simply want to force traders to set more cushion, to make losses slower and more manageable.
  • #20
  • Jan 2, 2019 5:55am Jan 2, 2019 5:55am
Quoting dispersion
{quote} Put some more cash (i.e. margin) and feel free to open bigger lots, earning more in absolute profit. They simply want to force traders to set more cushion, to make losses slower and more manageable.
I simply don't have the level of cash necessary - and I think that's true of most people. Right now I have my account funded with 15k. If they reduce margins down to what they did in Europe, I would need 150k to open the same sized positions. That's just never going to happen - even if I had 150k, I wouldn't waste it by putting it all in my CFD trading account, most of it would be in fixed interest and stocks.

It's both wasteful and unnecessary to require that much funding (to have margin requirements so strict), and most people wouldn't be able to put that kind of money in their account.

When I started out CFD and then forex trading - it was not long after I finished uni, and there's NO WAY anyone (except the 0.1%) is going to have that much money to do CFD trading with when they are just starting out. Nobody would realistically have that much money until they are well into their middle age and ONLY if they didn't buy property.

All they are doing is killing retail.
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