Breaking: ESMA finalizes new rules to govern leveraged trading

I know that Saxo's retail volumes have been down for like 5 months in a row because of these ESMA rules. You can just look at the latest Leaprate reports. This must not bode well since Geely recently became majority shareholder in Saxobank.

Tallinex is toast with no ability to get a depository bank. I have been using FXChoice primarily and about to start using a new broker setting up shop in Cayman (they also have UK based operations).

The US has been putting pressure on foreign banks to not play ball with Tallinex is my educated guess.

I use blueberry mkts in Aus. I'm tired of Esma.

The European Securities Markets Authority (ESMA) announced it is renewing the restrictions on CFDs trading for another three months as of February 1, 2019. The pan-European regulator also implied that it will monitor closely forex brokerages, as it has identified certain malpractices.

Ever since August last year, when these measures have been officially applied, CFD providers have been searching for ways to get around them, and more specifically the leverage cap to 1:30 for retail clients. Some of them are advertising to such clients the possibility of becoming professional clients upon request and thus becoming eligible to use higher leverage ratios. Another tactic forex broker use is moving their customers’ accounts to an intra-group third-country entity.

ESMA stated it is aware of those malpractices and will monitor closely CFD providers. The regulator also implied it is possible to introduce “other Union measures” it deems appropriate.

Ah, come on whats the point of all these renewals, why not make it truly official. Just make it law so traders can focus on other things.

I quite like the leverage cap now, but the 1;30 is way too low, still a cap is a good idea.

The Dutch authorities at least made it official permanently.

Starting today, 19th April, the ESMA regulations regarding leverage restrictions and binary options banning have become permanent on Dutch territory.

For those traders that think the way to escape ESMA is to register with Australian brokers: https://financefeeds.com/asic-warns-...-restrictions/

And for those who do not rely on outdated information provided by selective perception OutThere simply follow the already existing discussion here:

https://www.forexfactory.com/showthr...2#post12230452

That's the dumbest statement I have ever read.

You don't have to use FX related news to stalk my posts and one upmanship me just because your ego was hurt cause I didn't get excited over your generic footnote worthy advice.

BTW, April 16 2019 was only 4 days ago and that is not outdated.

Truth hurts, right?

It is outdated in terms if content and information - not time of release. Another example of selective perception. You are posting wrong information plus spaming them in a wrong thread (this is ESMA, not ASIC here) while the topic already exists elsewhere.

F off creep.

ESMA Alternative
- https://www.leaprate.com/financial-s...s-for-trading/
- https://www.ampfutures.com/trading-info/margins/
Spreadsheet:
SL Risk 50.0 is equivalent to = 2% against Free Margin (FM) with reference to SL - $
- > any number multiplied by 50 = 2% of the multiplication product,
-> any number multiplied by 100 = 1% of the multiplication product, etc.

Example: Spreadsheet row 18. (browser zoom in/out -> Ctrl + mouse wheel, reset to default zoom -> Ctrl + numlock-on 0 )

$30 SL x 50.0 SL Risk = £1,500 Free Margin (FM). FM + $40 Margin = $1,540 Balance.

($30 SL/$1,500 FM) x 100 = 2% of FM (Margin not included in risk calculation as considered 100% nontradable Broker reserve)

Spreadsheet notation:
100 points = 1 tick = $ 5.00.
25 points = 1/4 (0.25) tick = £1.25.
4 quarter ticks = 1 tick = 4 x £1.25 = £5.00.
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ESMA Alternative

Spreadsheet Notation correction:

Spreadsheet Notation:
25 points (0.25 index point) = 1 tick = $1.25 (per contract) -> see row 17.
100 points (1.00 index point) = 4 ticks = 4 x $1,25 = $ 5.00.

Heading -> Point Value = 1.00 Index Point Value ($5.00).

https://news.ampfutures.com/cme-e-mi...r-live-trading E-mini S&P 500 Futures Quotes and Volume https://www.cmegroup.com/trading/equ...sandp-500.html
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ESMA CFD US500 Comparison

CFD Index margins are not static as in the the above micro-E-mini S&P 500 futures - day margin at $40 per contract.

CFD Index margins are dynamic - as are cfd shares - and calculated -> price x leverage x exchange rate x lots (or number of shares).

ESMA US500 Index Leverage = 1:20 leverage = 1/20 = 0.05. Or in terms of percentage (1/20) x 100 = 5%.

Therefore 1:20 leverage = 0.05 = 5%.

Exchange rate = 1 (at parity) if account currency is USD.

CFD Margin = Price x leverage x exchange rate x lots (or number of shares)..

At 1 lot and price 2,287.60 CFD US500 Margin = 2.287.60 x 0.05 x 1 x 1.00 = $114.38 - > see row 17 & 18 Calculator source: ActivTrades SmartCalculator - https://www.activtrades.com/en/activ...martcalculator

Day Margin ROI comparisons:
In both cases SL distances are equal.
In both cases TP distances are equal.
The Futures risk is 2 %. The risk numerical conversion is 50.
The CFD risk is 1.99 %. The risk numerical conversion is 50.10.
The risk difference is 0.01 % - a negligible difference - all other respective metrics are considered of equal weight between the two.

1. MES Future: *
2. SL Risk = 50 = 2% of Free Margin.
3. Example - row 18: SL = $30, FM $1,500, Balance = $1,540.
4. FM/SL = $1,500/$30 = 50 SL numerical risk against FM. **
5. SL/FM x 100 = ($30/$1,500) x 100 = 2 % SL risk against FM.
6. TP % = TP/Balance x 100 = ($100/ $1,540) x 100 = 6.49 % profit against Balance.

* For ease of calculation and approximation modelling round turn commission/s of 2 x £0.37 = £0.74 have not been deducted from above MES Futures $100 TP.

 

1. US500 cfd: (* some brokers charge commission, others do not)
2. SL Risk = 50.10 = 1.99% of Free Margin.
3. Example - row 18: SL = $6, FM $300.62, Balance = $415.
4. FM/SL = $300.62/$6 = 50.10 SL numerical risk against FM.
5. SL/FM x 100 = ($6/$300.62) x 100 = 1.99 % SL risk against FM.
6. TP % = TP/Balance x 100 = ($20/ $415) x 100 = 4.819 = 4.82 % profit against Balance.

** This represents risk as a numerical value as opposed to % value. In the above case - in a perfect world of no slippage and no costs - 50 numerical consecutive SLs of $30 can be contained in a FM of $1,500 and is a 2% risk against FM. A numerical SL Risk of 30 will be 100/30 = 3.33% SL risk against FM -> proof -> SL $10, FM $300. FM/SL = $300/$10 = 30 SL Risk. SL/FM x 100 = $10/$300 x 100 = 3.33% risk against FM.

Margin - especially ESMA margin - is never included in risk calculation and is considered at 100% as unavailable broker reserve.
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As above:

The risk difference is 0.01 % - a negligible difference - all other respective metrics are considered of equal weight between the two.

Edit:

The risk difference is 0.01 % - a negligible difference.
As such and that margins are not included in risk calculations, all respective metrics are - with exception of margins - considered of equal weight between the two.

First stirrings 04-Feb-16: http://www.financemagnates.com/forex...-urges-action/

First Stirring - may be waves 16-May-19: https://www.financemagnates.com/fore...rseas-clients/

The Cyprus Securities and Exchange Commission (CySEC) proposed a tiered risk-based approach to leverage as a permanent national measure for investor protection.

The Cypriot regulator intends to introduce stricter leverage limits for retail clients falling within the ‘grey area’ (1:20), and providing slightly higher leverage ratios than ESMA’s for those falling within the upper tier of the positive target market (1:50). In order to classify for the upper ties, clients are required to have either a gross annual income exceeding €40 000 or net liquid assets of at least €200,000.

https://www.financemagnates.com/fore...rseas-clients/

https://www.leaprate.com/financial-s...etail-clients/

Australian regulator ASIC have once again expressed their concern regarding consumers who trade binary options. According to the regulator, consumers continue to suffer significant harm from trading these products, despite the regulatory measures taken so far.
The main notable points in ASIC’s latest consultation paper are:

1. Leverage restrictions of maximum 1:20
2. Imposed margin closeout level of 50%
3. Negative balance protection

https://www.leaprate.com/financial-s...ict-cfds-sale/