ESMA, the European Securities and Markets Authority is considering proposals to reduce the amount of leverage available to private clients trading CFDs, FOREX and spread betting to a maximum of 30:1.
Leverage has historically been as high as 500:1 so this may significantly reduce the amount of exposure clients can trade on.
Clearly there are good and bad points to this and certainly reduced margin along with negative balance protection (i.e. you can’t lose more than your account balance) is a good thing for the majority of inexperienced traders.
However, for experienced, professional and clients using CFDs and spread betting for hedging purposes this will have a big impact.
Here are the margin rate maximums that ESMA is proposing:
- 30:1 leverage on major currency pairs, increasing margins from 0.5% to 3.33%
- 20:1 leverage on major indices, increasing margins from 0.5% to 5%
- 10:1 leverage on commodities (excluding gold), increasing margins from 2% to 10%
- 5:1 leverage on equities, increasing margins from a min of 5% to 20%
If you’d like to give your feedback to EMSA answer this question: What impact do you consider that the envisaged measures would have on retail investors? on a Word document and upload it here.
Or you can comment on this site https://replytoesma.trading/ set up by IG…
Richard is the founder of the Good Money Guide (formerly Good Broker Guide), one of the original investment comparison sites established in 2015. With a career spanning two decades as a broker, he brings extensive expertise and knowledge to the financial landscape.
Having worked as a broker at Investors Intelligence and a multi-asset derivatives broker at MF Global (Man Financial), Richard has acquired substantial experience in the industry. His career began as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson), following internships on the NYMEX oil trading floor in New York and London IPE in 2001 and 2000.
Richard’s contributions and expertise have been recognized by respected publications such as The Sunday Times, BusinessInsider, Yahoo Finance, BusinessNews.org.uk, Master Investor, Wealth Briefing, iNews, and The FT, among many others.
Under Richard’s leadership, the Good Money Guide has evolved into a valuable destination for comprehensive information and expert guidance, specialising in trading, investment, and currency exchange. His commitment to delivering high-quality insights has solidified the Good Money Guide’s standing as a well-respected resource for both customers and industry colleagues.
You can contact Richard at richard@goodmoneyguide.com
