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Changes to Retail Client Trading Accounts

The European Securities and Markets Authority (ESMA) issued a product intervention restricting the marketing, distribution or sale of leveraged trading products, including rolling spot forex and CFDs, to retail clients.

The changes from ESMA are:

  • Maximum leverage limits on new positions:
    • 30:1 for major currency pairs
    • 20:1 for non-major currency pairs, gold and major indices
    • 10:1 for commodities other than gold and non-major equity indices
    • 5:1 for individual equities and other reference values
    • 2:1 for Cryptocurrencies
  • A standardised 50% margin close out rule on an account level basis
  • Negative balance protection on an account level basis
  • A prohibition on firms offering monetary and non-monetary benefits (excluding research and information tools)
  • A standardised risk warning which includes firm specific figures on the percentage of client accounts that have lost money trading CFDs

These measures will come into effect on 1st August 2018.

Professional Clients

Only retail clients will be affected by the new measures. Professional Clients can continue to benefit from existing margin rates, however they do not have the same level of regulatory protection that retail clients have.

Unchanged Protections

Waived Protections

We are not obliged to offer the following to Professional Clients but have elected to continue doing so:

  • Client money remains segregated from our funds and will be unaffected in the event of our insolvency
  • Best Execution remains unchanged as we owe all our clients a duty of best execution
  • The detail of Trade Confirmations remain unchanged and are sent by the end of the first business day following the execution of the trade, or earlier
  • Key Information Documents remain available to you

You will waive some FCA protections:

  • Margin and leverage limits remain unchanged despite the changes that ESMA introduce for retail clients
  • Mandatory changes to product features which protect retail clients will not be mandatory for you (eg. negative balance protection and margin close out levels).
  • We will assume you have the relevant knowledge and experience levels to understand the risks in trading leveraged products
  • We may use more sophisticated language when dealing with you as a Professional Client than we do with our retail clients.

Professional clients also:

  • Remain eligible for the Financial Services Compensation Scheme if you are a natural person.
  • Retain the rights to complain to the Financial Ombudsman Service when trading in a personal capacity.

Retail clients who wish to be categorised as a Professional Client must meet at least 2 out of the 3 qualifying criteria:

Trading Volume

An average of 10 significantly sized transactions per quarter over the last 4 quarters

Savings & Income

A financial instrument portfolio, including cash deposits, exceeding EUR 500,000 or currency equivalent

Work Experience

Worked in the financial sector in a professional position, requiring knowledge of the transactions or services envisaged, for 1+ year(s)

Request to be categorised as a Professional Client.

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