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FCA imposes bonus ban and leverage cap for CFDs

  • #41
  • Dec 6, 2016 1:08pm Dec 6, 2016 1:08pm
Quoting merrygold
What is your opinion about offshore brokers & australian brokers? - Think they also will cut down leverage?
I live in London and trade with IC Markets in Aus. Being FCA regulated, if the FCA specify 1:50 cap on leverage I don't see how ICM can refuse if it wants to keep its UK customers.
  • #42
  • Dec 6, 2016 1:11pm Dec 6, 2016 1:11pm
So all of a sudden the FCA cares about retail traders losing money, but what happens in the market if traders dont lose money?

They need losers.

Wont happen
  • #43
  • Dec 6, 2016 1:17pm Dec 6, 2016 1:17pm
Quoting JensG
It's a proposal for now and considering they're talking about retail there might be a way around for more professional traders.
I agree. I bet it will be trading through a commercial vehicle such as a ltd company.
  • #44
  • Dec 6, 2016 1:24pm Dec 6, 2016 1:24pm
Quoting Derivative92
{quote} I agree. I bet it will be trading through a commercial vehicle such as a ltd company.
Usually you can qualify as a professional trader (it's a MiFid concept as far as I know) and some more professional brokers will only work with you if you are.

Edit: some brokers also ask you for your trading style to create a risk profile and set your maximum leverage accordingly and to be fair, limiting leverage for people who like to keep positions open over the weekend is only fair - the broker has to protect his own arse. Claiming big sums from under financed retailers is nearly impossible.
  • #45
  • Dec 6, 2016 1:43pm Dec 6, 2016 1:43pm
Quoting alphaomega
The spot FX market is based on wrong and outdated model! This is the real reason why we see so many scammers and dishonest practices followed by stupid regulations.... What we really need, is a global centralized exchange for FX trading. We just have to get rid of all OTC trading and all bucket shops and scammers. We need real electronic exchange, with unified standardized platform, public open order book, market depth...... open free API / FIX access....... This central exchange should be open to anyone. It doesn't matter if you your trade size...
i am truly all in for all the above.
almost sounds like the (almost fair) trading ground of stock market.

only i am afraid, that when all these points met, so will the conditions change too, between 1-5x max leverage, just as most stock markets offer.
with no brokers taking the other side of my trade, or manipulate my price feed, slippage, execution, and whatever i might not even think about,... the playing ground should level nicely.
maybe a price to pay.
there is always, always another trade!!
  • #46
  • Dec 6, 2016 2:13pm Dec 6, 2016 2:13pm
Quoting profitfarmer
{quote} i am truly all in for all the above. almost sounds like the (almost fair) trading ground of stock market. only i am afraid, that when all these points met, so will the conditions change too, between 1-5x max leverage, just as most stock markets offer. with no brokers taking the other side of my trade, or manipulate my price feed, slippage, execution, and whatever i might not even think about,... the playing ground should level nicely. maybe a price to pay.
Fx and stocks are no comparable. Stocks have much higher volatility. It is normal for most stocks to move 4-5% in one day. Some low cap stock can move over 100% in one day......
Fx has very low volatility. ADR is around <1% for most pairs. You rarely see moves over 2 %.....
So it is normal to trade it with high leverage is order amplify the profit potentials. If the max leverage is set to 5:1 99% of traders will leave FX and will migrate to other markets.
Also with exchange trading, the brokers can still provide additional leverage to their clients. As long as the brokers are well capitalized so they can handle the risks. Brokers who are not well capitalized will not provide high leverage. Simple.
  • #47
  • Dec 6, 2016 3:02pm Dec 6, 2016 3:02pm
I think it's a good news rather than a bad one. It is the fact that most traders who don't know risk management destroy their account by using high leverage on trading. I risk 1-2% of balance per trade and it's only using 5-10 leverage. Though somebody trades with narrow stop loss and larger lot size, 50 leverage is more than enough.

Some traders are talking about the risks of puting more money online with lower leverage. If you believe FCA regulator you will know that your money is under protection of FSCS for £50,000, and there are FCA brokers offering insurance for £500,000, it is more than enough for most traders. If you don't believe FCA you can still choose brokers with other regulations who offer high leverage.

It really affects some traders anyway, but it will surely protect more. I think it is more than a descester for market making brokers.
  • #48
  • Dec 6, 2016 3:27pm Dec 6, 2016 3:27pm
Quoting alphaomega
{quote} Fx and stocks are no comparable. Stocks have much higher volatility. It is normal for most stocks to move 4-5% in one day. Some low cap stock can move over 100% in one day...... Fx has very low volatility. ADR is around <1% for most pairs. You rarely see moves over 2 %..... So it is normal to trade it with high leverage is order amplify the profit potentials. If the max leverage is set to 5:1 99% of traders will leave FX and will migrate to other markets. Also with exchange trading, the brokers can still provide additional leverage to their...
understand all that.
however with the 2% vola in fx vs. the 100% in penny stocks...you just gave justification to the 50:1 leverage from regulator's wiew?
there is always, always another trade!!
  • #49
  • Dec 6, 2016 3:34pm Dec 6, 2016 3:34pm
A quick google search on various regulations that discuss high leverage shows that this has been a 'hot' topic since 2012, lets see if this goes through.
MY SITTING, NEVER MY THINKING!
  • #50
  • Dec 6, 2016 6:55pm Dec 6, 2016 6:55pm
Quoting merrygold
{quote} Same here. But please tell what you think, i am a Big believer of hearing others opinion
i think the norm will be 50:1 around the world unless you trade with a unregulated broker
  • #51
  • Dec 6, 2016 7:55pm Dec 6, 2016 7:55pm
FCA funds protection limit should increase 500k (min).
Trade with Patience
  • #52
  • Dec 6, 2016 8:13pm Dec 6, 2016 8:13pm
I hope those big guy in brokerage firm read this...If you didn't want all your clients fly away...please do something to revoke that FCA sh**ty rules...whose gonna put all their money online in mt4 just to earn a mere 1% profit? That is ridiculously stupid! Maybe it is time to say goodbye to FCA regulated brokers and say hello to ASIC regulated one...
  • #53
  • Edited 8:47pm Dec 6, 2016 8:32pm | Edited 8:47pm
There is the possibility to comment on the proposal and to give a direct feedback at the FCA website.

Especially Q4: "Do you agree with the proposal to limit the risks of CFDs by taking steps to limit leverage for retail clients?" and Q5: "Do you agree with the proposal to adopt different leverage limits for inexperienced and experienced retail clients?" deal with the now heavily discussed cap issue.

If a numerous amount of traders plead for an option to use higher leverage after fully understand the potential risks, this might indeed have an influence. I appreciate the chance of reviewing the proposal and can only encourage you to do so (in a serios and objective way of course!) as well.

Let our voices be heard!

https://www.fca.org.uk/cp16-40-response-form
  • #54
  • Dec 6, 2016 10:36pm Dec 6, 2016 10:36pm
Quoting Drolph
There is the possibility to comment on the proposal and to give a direct feedback at the FCA website. Especially Q4: "Do you agree with the proposal to limit the risks of CFDs by taking steps to limit leverage for retail clients?" and Q5: "Do you agree with the proposal to adopt different leverage limits for inexperienced and experienced retail clients?" deal with the now heavily discussed cap issue. If a numerous amount of traders plead for an option to use higher leverage after fully understand the potential risks, this might indeed have an influence....
everyone who disagree FCA , please go here and say it by reason
It's effective
  • #55
  • Dec 6, 2016 10:49pm Dec 6, 2016 10:49pm
Quoting alphaomega
More proof that all regulators are useless! OK, the ban on bonuses - that's .....understandable. But the cap on leverage (50:1) - bad! The reduction of the leverage will have absolutely no benefit for the traders. The only effect from this will be that traders will be forced to deposit ( and keep) more money in their trading accounts. And I don't see this as a positive thing. Why? 1. The majority of traders will continue to lose money no matter what. With high leverage they lose small deposits faster, and with low leverage they lose larger deposits...
+1
Never Gamble Forex
  • #56
  • Dec 7, 2016 12:12am Dec 7, 2016 12:12am
Contrary to the original post ... this is not a 'ban' effective immediately ... they are seeking industry consultation and making a decision in 2017.

Still, not looking good for UK traders - y'all might have to start trading with ASIC brokers!

I think the leverage limits are misguided - you can't scalp with 25-50:1 - simple as that. FCA should focus on unscrupulous behaviour ie stealing slippage, market makers chasing negative balances when they haven't actually incurred a loss etc

IG shares got KILLED http://www.businessinsider.com.au/ig...6-12?r=US&IR=T
  • #57
  • Dec 7, 2016 2:01am Dec 7, 2016 2:01am
Quoting alphaomega
The spot FX market is based on wrong and outdated model! This is the real reason why we see so many scammers and dishonest practices followed by stupid regulations.... What we really need, is a global centralized exchange for FX trading. We just have to get rid of all OTC trading and all bucket shops and scammers. We need real electronic exchange, with unified standardized platform, public open order book, market depth...... open free API / FIX access....... This central exchange should be open to anyone. It doesn't matter if you your trade size...

Good idea, but it's not going to happen.
  • #58
  • Dec 7, 2016 2:07am Dec 7, 2016 2:07am
Quoting alphaomega
{quote} Fx and stocks are no comparable. Stocks have much higher volatility. It is normal for most stocks to move 4-5% in one day. Some low cap stock can move over 100% in one day...... Fx has very low volatility. ADR is around <1% for most pairs. You rarely see moves over 2 %..... So it is normal to trade it with high leverage is order amplify the profit potentials. If the max leverage is set to 5:1 99% of traders will leave FX and will migrate to other markets. Also with exchange trading, the brokers can still provide additional leverage to their...

Exactly, 1:5 leverage on forex won't work due to extremely low volatility. 1:500 really isn't so much on forex if you don't want to keep all your investing capital at broker account and you use tight 6-10 pip stop loss and add to position when it's more and more profitable.
  • #59
  • Dec 7, 2016 6:12am Dec 7, 2016 6:12am
Quoting insomniawawa
{quote} Exactly, 1:5 leverage on forex won't work due to extremely low volatility. 1:500 really isn't so much on forex if you don't want to keep all your investing capital at broker account and you use tight 6-10 pip stop loss and add to position when it's more and more profitable.
Huge leverage isn't good but 1:10 or 1:50 are not fare too. We trade forex because of leverage advantage and there is no justification to dump huge amount in broker's account. I don't think leverage can protect anyone from losing in forex, high leverage is faster loss and low leverage is slower loss if anyone has lack of trading skills.

Quoting alphaomega
{quote} Fx and stocks are no comparable. Stocks have much higher volatility. It is normal for most stocks to move 4-5% in one day. Some low cap stock can move over 100% in one day...... Fx has very low volatility. ADR is around <1% for most pairs. You rarely see moves over 2 %..... So it is normal to trade it with high leverage is order amplify the profit potentials. If the max leverage is set to 5:1 99% of traders will leave FX and will migrate to other markets. Also with exchange trading, the brokers can still provide additional leverage to their...
Fx has very low volatility?!!! Never knew that. Thanks for this info.
Never Gamble Forex
  • #60
  • Dec 7, 2016 6:31am Dec 7, 2016 6:31am
Quoting yesyoucan
{quote} Fx has very low volatility?!!! Never knew that. Thanks for this info.
Of course it has, it's pretty much related to the liquidity and FX is the most liquid market. High volatility is a sign of a low liquid market - if there are fewer other market participants willing to take the other side the price will gap (or in other words: move faster and wider). That is why I trade the majors only and it's also the reason why some experts say that a financial transaction tax would make prices fluctuate more and not less.
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