FCA imposes bonus ban and leverage cap for CFDs

Recently, the FCA has released a proposal which looks to lower leverage on FX and CFD products.
The maximum leverage allowable under this proposal would be 50:1.

Specifically the FCA is proposing:
25:1 maximum leverage for clients with less than 12 months active trading experience
50:1 maximum leverage for clients with greater than 12 months active trading experience

There is a feedback period provided by the FCA regarding their new proposed rules. participate in the feedback period .
To submit feedback to the FCA on this proposal click on below link:https://www.fca.org.uk/cp16-40-response-form

Disagree with first. Majority of traders will simply lower their stakes due to leverage restriction (not adding more money to keep the same stake) and this in theory will allow them to live longer with their trading.

Agree with second. For those traders who decide to keep up with current size of stakes they'll need more capital and thus in case of losing the amount lost will be much more bigger. High leverage was like a "fire" which burns some newbies' fingers although there were many traders that lost big time although they could trade much safer with lower leverage. Double-edge sword I would say.

You really can't lose more than you might previously with less leverage (assuming it was 1:200 now), unless you really increase the amount in the account more than 2-4x to offset the leverage decrease. And in that case, (if you are that irresponsible as a new trader) you'd be limited to the 1:25 leverage and have to bump up your account by more than 8x to give you the balance needed to trade larger lots to give you the equivalent of what you have now.

However, if you were a new trader, then you wouldn't have expectations of what you could have achieved with a higher leverage previously. So given the usual warnings about typical trade sizing, the overall loses will be relatively smaller vs what they would have been with a higher leverage (ignoring overall balance requirements). Therefore, there is still plenty of chance they will still get 'burned' in trades by over trading. Nothing can fix that, except learning from experience.

Alternatively, if you have traded with higher leverage before, and you really want to play the game the 'old' way, then you have to step up and load the cannon with the funds to play the game. That's it. Also, due to the amount of margin required for trades you put on, you will have to be a bit more careful about how you trade, but more so for those that want to put on a lot of positions or potentially ride some open trades (no stop loss) during some volatile movements.


In fact, once this sounds like it's becoming closer to being enforced, I'm thinking I will probably decrease my leverage in stages and get used to what it feels like. Afterwards, I might not mind (and just accept the slower account growth) or decide to increase the balance accordingly, to offset the greater margin requirements.

This is a reasonable step being taken to help protect those that don't have the knowledge/self-awareness of how to protect themselves from the market risk that exists (i.e. risks that they don't have the experience to perceive, especially during the early days of trading). Arguing against it is like those that complain against seat belts, gambling awareness related to online gambling, safety requirements for helmets/work boots,etc. All of these processes/changes exist to protect ourselves and others from the risks inherent in situations that we have not noted at the time.

https://www.fca.org.uk/cp16-40-response-form

response form

edit: it is for firms and individuals,

but still has an address,

I will be sending a letter and email,

everyone should respond, let's try and hold them off for a year

Why do you guys post everything multiple times!?
I have already mentioned the response form days ago including the message, that it is meant to be for individuals as well!

It really needs to be in the Thread starters post...

also I don't mind if the response form is posted multiple times...

This thread will probably reach more than 20 pages, people need to be reminded until they actually take action...

I prefer to keep my money in my bank and not the brokers.

I have filled out the FCA form protesting against the reduction in leverage. I hope many of us take the time to fill the FCA form out too.

I have to agree, maybe PoundTrader could add this to the initial post..

I see this as a big win for bucket shops who operate from small islands with non-existent regulatory body. Me personally, I will move to an Australian broker if 1:50 leverage is enforced by FCA as I require 1:200 for my strategy to work. I hope Australia doesn't join this 50 bandwagon.

FCA might have killed the retail trading business in UK. Investors know this, just look at the stock price of brokers reacting to this news.

Please explain why you can't trade with 1:50 leverage for your strategy. I'm very curious to understand why.

CMC Markets considers HQ move from UK to Germany following FCA CFD rules: Sky News


http://www.leaprate.com/2016/12/cmc-...ules-sky-news/

Interesting, but as BaFin is about to prohibit CFD's (at least in cases the broker is not taking the risk for losses) - is that a real benefit?

- http://www.financemagnates.com/forex...ex-cfds-firms/

- http://www.financemagnates.com/forex...influence-fca/

- https://www.fca.org.uk/cp16-40-response-form

Well, if the FCA wanted small traders out... They will finally get it.

Soon, risking your money with unregulated brokers will be the norm if it continues like that.

Good point.

So they try to help small traders yet force them into the hands of the offshore scammers.

"Hello, I'm from the government and I'm here to help".

Forex without leverage and have to dump most of money with brokers ehh Retail forex is under attack .

1. http://www.leaprate.com/2016/12/fca-...nsation-rules/
2. https://www.fca.org.uk/publication/c...on/cp16-42.pdf

^^^^^^ this ^^^^^^^^^^

They're looking to extend and revamp client compo rules. Fair enough you might say, extending the protection, what's the harm in that...

but this clause here:

" Risk-based levies: We are looking at whether FSCS levies should better refl ect the risks of specifi c practices, particularly on fi rms distributing higher risk products. We also propose a specifi c rule to introduce data collection for activities linked to higher risk products to help us develop a risk-based approach in future."

... will translate to all trading activities getting a hell of a lot more expensive as they pass on the insurance and compo costs to the trading firms, and then... on to the clients.