ESMA Rules EuropeFX

ESMA measures on the provision of CFDs

The European Securities and Markets Authority (ESMA) has published in the Official Journal (OJ) of the European Union the measures on the provision of Contracts for Differences (CFDs) to retail investors that came into effect on the 1st of August 2018.

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The product intervention measures are:

Stop out level will become 50% on all EuropeFX Pro platforms

From 1st of August 2018 stop out level will become 50% on all EuropeFX Pro Trading platforms and for all clients. Clients that have open positions and margin level between 20-50% have highest probability of reaching stop out levels.

Example 1:

Account currency EUR and account leverage 1:50

On 30/07/2018 open 1 lot GOLDEURO at price 1070. Required margin is 2,140 EUR (2%*1*100*1,070 EUR).

At the end of day 31/07/2018 the account Equity is 856 EUR and thus the Margin Level 40 % (= Equity/Margin*100 = 856/2,140*100)

With current stop out level at 20% the position will remain open since the Margin Level is Higher than 20%.

On 01/08/2018 the stop out level is increased to 50%, with the account Margin Level being lower at 40%, client will be stopped out (i.e. the position will close).

Example 2:

Account currency USD and account leverage 1:500

On 30/07/2018 open 3 lots USDJPY with required margin 300,000/500 = 600 USD.

On 31/07/2018 open 1 lot GOLD at price 1,260 with required margin 0.5%*1*100*1260 = 630 USD

After 1st August the required margin for the above positions will remain the same (i.e. 630 USD)

Example 3:

Account currency USD and account leverage 1:500, after 1st August the account leverage will be 1:30

On 01/08/2018 open 3 lots USDJPY with required margin 300,000/30 = 10,000 USD, on the same day he opens 2 lots WTI at price $72 with required margin 10%*2*1,000*72 = 14,400 USD

Total required margin is 10,000+14,400 = 24,400 USD

Example 4:

Account currency USD and account leverage 1:500

On 30/07/2018 open 1 lot USDJPY with required margin 100,000/500 = 200 USD. On 31/07/2018 open 10 lots #US30 at price 24700. Required margin 0.2%*10*24700 = 494 USD

Total required margin 200+494 = 694 USD

After 1st August the account leverage will be 1:30 and new margin requirements apply for all asset classes/instruments
On 01/08/2018 opens another 1 lot USDJPY with required margin 100,000/30 = 3,333.33 USD.
On 01/08/2018 open another 10 lots #US30 at price 24700. Required margin 5%*10*24700 = 12,350 USD

Total required margin 200+494+3,333.33+12,350 = 16,377.33 USD

Example 5:

Account currency USD and account leverage 1:500

On 30/07/2018 opens 10 shares #Microsoft at price 102.00. Required margin is 4%*10*102.00 = 40.80 USD.
After 1st August the account leverage will be 1:30 and new margin requirements apply for all asset classes/instruments
On 01/08/2018 client hedges the 10 shares #Microsoft at price 102.00. Required margin is 20%*10*102.00 = 204 USD.

Total required margin for the hedged position is 204 USD (higher margin requirement from the two trades), if Free Margin is less than 204 then the hedge trade won’t be opened.

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Margins required for the positions opened prior to the 1st of August 2018 will not be affected.

Example 1:

Account currency EUR and account leverage 1:50

On 30/07/2018 open 1 lot GOLDEURO at price 1070. Required margin is 2,140 EUR (2%*1*100*1,070 EUR).

At end of day 31/07/2018 the account Equity is 856 EUR and thus the Margin Level 40 % (= Equity/Margin*100 = 856/2,140*100)

Example 2:

Account currency USD and account leverage 1:500

Open 3 lots USDJPY at 01/08/2018. Required margin 300,000/30 = 10,000 USD

After 1st August the account leverage will be changed to 1:30 and the required margin for the above positions will be 10,000 USD.

Example 3:

Account currency USD and account leverage 1:500

At 30/07/2018 open 1 lot USDJPY with required margin 100,000/500 = 200 USD.

At 01/08/2018 open 1 lots USDJPY with required margin 100,000/30 = 3,333.33 USD.

After 1st August the account leverage will be changed to 1:30 and the required margin for the above positions will be 3,333.33 USD.

Example 4:

Account currency USD and account leverage 1:500

At 30/07/2018 open 3 lots USDJPY with required margin 300,000/500 = 600 USD.
At 01/08/2018 open 1 lots USDJPY with required margin 100,000/30 = 3,333.33 USD.

After 1st August the account leverage will be changed to 1:30 and the required margin for the above positions will be 3,333.33 USD.

From 1st of August 2018 the margin required for hedging will be based on new rules.
Traders should ensure that they have enough Free Margin in their trading account to open a new position based on the new margin requirements.

Following table shows the maximum leverage per Asset Class that will apply after 1st August 2018 for Retail clients:

FINANCIAL INSTRUMENTS MAX LEVERAGE
Forex Majors1:30
Forex Minors1:20
Gold, Gold oz & Gold gr1:20
Spot Index Major1:20
Indices Futures1:20
Silver1:10
Commodity Futures1:10
Energy Futures1:10
Energy Spot1:10
Spot Index Minor1:10
US, UK, French & German Shares1:5
Cryptos1:2