ESMA Regulation

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.”


The ESMA Regulation:

The European Securities and Market Authority (ESMA) announced new regulations on the marketing distribution or sale of CFDs designed to provide protections to Retail Clients*.

These changes, as described below, will not affect clients who choose to apply and become approved satisfying certain requirements as Elective Professional Clients**.

If you wish to apply to this categorization, please click here to fill the form to be completed, scanned and sent to [email protected] or through fax +357 24400271.

For all other Retail Clients, the changes took effect as of August 01, 2018 for a period of three months.
Through the Cyprus Securities and Exchange Commission Circular C282, we wish to inform our retail clients that the restriction on the marketing, distribution or sale of CFDs is extended from November 01, 2018 until July 01, 2019.

The changes include the following for All Retail Clients*:

1- Maximum allowed leverage as follows:

• 30:1 on major currency pairs
• 20:1 on non-major currency pairs
• 20:1 on major indices and bullion
• 10:1 on commodities (other than gold)
• 10:1 on non-major equity indices
• 2:1 on crypto currencies

2- A 50% margin close out level to be applied on all trading accounts. This means Clients need to maintain a higher equity to margin requirement of open positions ratio of 50%.

3- Negative balance protection on a per account basis. This will provide an overall guaranteed limit on Retail Clients losses.

4- A standardized risk warning to be provided, including the percentage of losses on a CFD provider’s Retail Clients accounts.

To find the full ESMA publication on its product intervention measures: please click here.

For more information, kindly refer to the Company’s Client Categorization Policy.

How will this affect traders?
These changes may impact your account in the following ways:

1- The margin required for most instruments will be increased for your existing and new positions. For example, the required margin for 1 lot (contract size 100,000) of leverage 1:100 will be EUR 1000, as of 1 August 2018 the leverage will be adjusted to 30:1 hence the required margin will increase to EUR 3,333.
2- Your open positions will be hedged automatically if the margin level drops to 50% instead of 20%.
3- New orders placed may be rejected due to insufficient funds on your MT account.

The new changes will impact both existing open trades as well as new trades. Therefore, you may want to consider depositing additional funds into your account in order to meet the new, higher margin requirements. Alternatively, you may want to close some of your open trades in order to ensure that you have enough funds in your account to meet the new margin requirements. If funds in your trading account are not sufficient, then the system will automatically close out your positions, in accordance with the terms of the Client Agreement.

Who is affected by the changes?
The new leverage limits and negative balance protection rules apply to all Retail Clients trading with a CFD broker regulated in the European Union.

Do I have alternatives?
The regulatory changes required by ESMA are designed to provide greater protections to Retail Clients by reducing the maximum risk (leverage) they can take while trading CFDs and by ensuring that all brokers guarantee that Retail Clients cannot lose more than they deposit in their trading accounts. However, Professional Clients will not follow the proposed ESMA leverage changes. Keep your current margins by applying to client classification to Professional status. Note that not all clients are eligible and the request will be subject to review.

Select to be re-classified as an Elective Professional Client click here.

*Retail Clients are Clients who are not categorized as Professional Clients or Market Counterparties, for full access to the Client Categorization please click here.

**Elective Professional Client have less restrictions when trading in CFD’s but are entitled to less protections under the “law” (described in Part II of the Second Appendix of the Law 87(I)/2017 (the “Law”)) than if a Client was categorized as a Retail Client.

For example, in contrast to Professional Clients, Retail Clients may be entitled to compensation under the Investors Compensation.

Retail Clients may request become Professional Clients (i.e. Elective Professional Clients) and waive certain protections if following an assessment of the expertise and knowledge of the Clients by the Company, the Company is reasonably assured that, in light of the nature of the transition or service envisaged, the Client is capable of making his / her own investment decision and understanding the risks involved by fulfilling at least 2 out of 3 following criteria:

1. The Client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 trades or transactions per quarter over the previous four quarters.
2. The size of the Client’s financial instrument portfolio, defined as including cash deposits and financial instruments exceeds EUR 500,000.
3. The Client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.

If you have any questions regarding any of the above please do not hesitate to contact us.
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