Formax Prime's response to new ESMA CFDs leverage changes


The European Securities and Markets Authority (ESMA) has today published new and stricter regulations on the distribution, marketing and sale of CFDs, including rolling spot forex. This new regulation will affect all retail investors across the EU and has been introduced in order to increase the standards of conduct across the industry. It will come into effect from 1st August 2018.

The new CFDs and Spot Forex regulations by ESMA 

Relevant leverage changes for Rolling Spot Forex CFDs:

o  1:30 for major currency pairs

o  1:20 for non-major currency pairs and Gold

o  1:20 for other precious metals

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In addition:

o  A stop out rule will also be applied which is set to standardise the percentage of margin, at 50% of minimum required margin on a per account basis.

o  Negative balance protection will be applied on a per account basis, effectively providing retail traders an overall guaranteed limit on retail client losses.

o  There will now be a standardised risk warning, including firm specific figures on the percentage of client accounts that lost money trading CFDs 

Formax Prime Capital (UK) Limited, as an FCA authorized and regulated broker, welcomes the changes, and will be able to comply with these new requirements for its clients. However, it has concerns as to the number of traders who may unknowingly put themselves at risk of large financial losses by chasing larger leverage through trading companies who are “regulated” by a body outside the EU or who are asked by their current broker to re-categorise themselves as “professional” when in fact they should not be re-categorised.

The benefits of an FCA regulated broker

All FCA regulated brokers have to adhere to these measures announced by ESMA as well as a number of other strict regulatory requirements all of which are designed to protect the retail investor complying with Client Assets (CASS) rules to ensure all client funds are protected, essentially ring-fencing client monies from operational business funds.

On top of this Formax Prime clients are covered by the Financial Services Compensation Scheme (FSCS) which offers clients up to £50,000 in compensation, in the unlikely event that Formax are unable to meet their financial obligations.

About Formax Prime Capital (UK) Limited

Formax Prime Capital (UK) Limited, is regulated by the FCA and offers Forex ECN trading, with competitive spreads from 0.2 pips on MT4 and 1.5 pips on ZuluTrade platforms. Clients can also choose pricing models from ECN commission free or ECN raw spreads + commission. Further details of these costs and charges can be found on https://www.formaxprime.co.uk/products/forex-pairs

In addition to the competitive spreads, Formax Prime Capital (UK) Limited believe in developing long-term partnerships with clients from day one, by providing a robust trading platform, focused products and 24/5 support by phone with experienced staff and/or live chat via the website.

Experience the professional difference that an exclusive ECN Forex broker can make, and discover the new way to trade, visit www.formaxprime.co.uk or call us on +44(0)20 3819 3100.The European Securities and Markets

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