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Changes to trading conditions for retail clients as of 01.08.2018

Dear Clients,

On 22 May 2018, the European Securities and Markets Authority (ESMA) adopted two Decisions under Article 40 of Regulation (EU) No 600/2014:

1. to restrict the marketing, distribution or sale of contracts for differences (CFDs) to retail clients; and

2. to prohibit the marketing, distribution or sale of binary options to retail clients.

In accordance with Article 40(5) of Regulation (EU) No 600/2014, this Notice provides details of these Decisions and the time from which the measures will take effect. These measures have been published in the Official Journal of the European Union on 1June 2018 and they will start to apply from 2 July 2018 for binary options and from 1 August 2018 for CFDs. MiFIR gives ESMA the power to introduce temporary intervention measures on a three monthly basis. Before the end of the three months, ESMA will review the product intervention measures and consider the need to extend them for a further three months.

The product intervention measures ESMA has adopted under Article 40 of the Markets in Financial Instruments Regulation include:

  1. Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, which vary according to the volatility of the underlying:

 

  • 30:1 for major currency pairs or 3,33% of the notional value of the CFD when the underlying currency pair is composed of any two of the following currencies: US dollar, Euro, Japanese yen, Pound sterling, Canadian dollar or Swiss franc;
  • 20:1 for non-major currency pairs, gold and major indices or 5% of the notional value of the CFD;
  • 10:1 for commodities other than gold and non-major equity indices or 10% of the notional value of the CFD when the underlying commodity or equity index is a commodity or any equity index other than those listed in point above;
  • 5:1 for individual equities and other reference values or 20% of the notional value of the CFD when the underlying is share or not otherwise listed in this Annex;
  • 2:1 for cryptocurrencies or 50% of the notional value of the CFD when the underlying is a cryptocurrency;

 

  1. A margin close out rule on a per account basis. This will standardise the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more retail client’s open CFDs;

 

  1. Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses;

 

  1. A restriction on the incentives offered to trade CFDs; and

 

  1. A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.

 

These measures concern all the clients categorized by EuroFinance as RETAIL.

Information about client categorization by EuroFinance COULD BE FOUND HERE.

Information about client categorization change COULD BE FOUND HERE.

Information about the Decisions, published on ESMA’s webpage COULD BE FOUND HERE.

07:45 | 21.06.2018