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ESMA PRODUCT INTERVENTION MEASURES

Effective from 1st Aug 2018

This page provides a brief summary of ESMA Product Intervention Measures and the new trading conditions that will be implemented.

Who is ESMA?

ESMA is an independent EU Authority that contributes to safeguarding the stability of the European Union's financial system by enhancing the protection of investors and promoting stable and orderly financial markets.

What are the new measures adopted by ESMA?

ESMA has agreed on measures in relation to the provision of CFDs to retail clients. The measures restrict the marketing of CFDs to retail investors as well as restrictions on leverage limits, margin call and close out levels as below.

  • Leverage Limits:

    The following limits apply on the opening of new CFD position, which vary according to the volatility of the underlying asset:

    • 30:1 for major currency pairs;
    • 20:1 for non-major currency pairs, gold and major equity indices;
    • 10:1 for commodities other than gold and non-major equity indices;
    • 5:1 for individual equities and any underlying not otherwise mentioned;
    • 2:1 for cryptocurrencies.
  • A margin close-out rule on a per account basis;
  • A negative balance protection on a per account basis;
  • A prohibition on benefits and incentivising trading;
  • A standardised risk warning.

Who do the new ESMA measures apply to?

The product intervention measures will apply to both, retail clients residing in the European Economic Area (EEA) and to third country residents.

When will the new measures take effect and are they permanent?

The new measures on CFDs will come into effect on 1st August 2018 and will apply provisionally for three months and may be a subject to change at the discretion of ESMA.

What are the changes that FXCC is implementing to comply with the new ESMA measures?

FXCC will implement the following changes in trading conditions for retail clients:

  • As of Wednesday 1st of August 2018 at 00:00 server time all pre-existing trades on the current instruments will be placed in ‘close only’ mode and no new positions on the current instruments will be accepted; any pending orders on the current instrument that may trigger on or after the above date, will also be cancelled.
  • A new instrument list will be created and become available for trading from Monday 30th of July 2018, the new instruments will have the following trading conditions as highlighted by ESMA Product Intervention measures on CFDs:
    Category Instrument Max Leverage*
    Major Currency Pairs CADCHF., CADJPY., CHFJPY., EURCAD., EURCHF., EURGBP., EURJPY., EURUSD., GBPCAD., GBPCHF., GBPJPY., GBPUSD., USDCAD., USDCHF., USDJPY. 1:30
    Non-Major Currency Pairs & Gold AUDCAD., AUDCHF., AUDJPY., AUDNZD., AUDUSD., EURAUD., EURNZD., GBPAUD., GBPNZD., NZDCAD., NZDCHF., NZDJPY., NZDUSD., EURPLN., USDPLN., EURTRY., USDTRY., USDSGD., EURSGD., USDNOK., EURNOK., GBPNOK., NOKJPY., USDHKD., EURHKD., USDSEK., EURSEK., GBPSEK., USDDKK., EURDKK., USDMXN., XAUUSD. 1:20
    Commodities other than Gold XAGUSD. 1:10

    * Please note that the new instruments will require different levels of margin, therefore clients who wish to hedge trades that are already placed on the old instruments are required to cover margin for both sides of the trade.

How will the new measures affect the leverage limits?

The new ESMA leverage limits imposed on CFDs set the maximum leverage that providers can offer you when opening a CFD position. Therefore, in order to comply with ESMA regulation, we will be required to reduce the leverage on all of our instruments for retail clients as per the above table.

Practical Example: If your current leverage is 1:200 and you open a new EURUSD position of size 0.1 standard lot, your margin requirement is 50.00 EUR. While under the new measures (once they come in to force) your leverage will be 1:30 and the margin requirement for the same position will be 333.33 EUR.

How will the new measures affect my trading?

As a retail client please note that these rules will not immediately impact your trading but you need to be aware and adapt your activities starting from 1st August 2018, in particular the change in leverage that will apply to your account.

In other words; the new margin requirements will affect the new positions opened on and after the 1st of August 2018 while positions opened prior to 1st of August 2018 will remain unaffected. Therefore, you should ensure that you have enough free margin in your trading account to open new positions based on the new margin requirements.

FUND YOUR ACCOUNT

Will FXCC implement any changes in the close-out level?

The 50% margin close-out per account rule is already effective on your account, therefore, no change will be implemented to our existing close-out level.

Where can I find ESMA’s official decision?

ESMA’s official decision about the product restriction measure could be found in different languages via the ESMA website here.

Is it possible to try trading with the new planned ESMA changes?

We urge all our client to get acquainted with the changes to be implemented and adjust your trading strategy accordingly, in particular to the change in leverage that will apply to your account; you may need to add funds to your account. Please note that adjustments may be required on Expert Advisors for new symbol and settings.

In order to make this transition as smooth and seamless as possible, we have decided to create a new ESMA demo account, which is now set to the new leverage conditions set out by the new ESMA regulation (see table above).

OPEN ESMA DEMO

Additionally, we have introduced a special Margin Calculator that simulates the new margin requirements for positions opened after the leverage changes take place. You can access the new Calculator by visiting the Traders Tools page inside your Trader Hub.

RISK WARNING: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products, is highly speculative and involves substantial risk of loss. It is possible to lose all the initial capital invested. Therefore, Forex and CFDs may not be suitable for all investors. Only invest with money you can afford to lose. So please ensure that you fully understand the risks involved. Seek independent advice if necessary.

RISK WARNING: Trading in Forex and Contracts for Difference (CFDs), which are leveraged products, is highly speculative and involves substantial risk of loss. It is possible to lose all the initial capital invested. Therefore, Forex and CFDs may not be suitable for all investors. Only invest with money you can afford to lose. So please ensure that you fully understand the risks involved. Seek independent advice if necessary.

FXCC does not provide services for United States residents and/or citizens.

FX Central Clearing Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC), under CIF Licence Number 121/10 and operates under the EU Markets in Financial Instruments Directive (MiFID). FX Central Clearing is on the FCA(UK) Register (Reference Number 549790) and EEA Authorised.

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