Derivatives trading technology developer SpotOption announced today the launch of its latest product, Digital Contracts. These promise to provide a transparent new way to trade on assets with real-time prices such as stocks, commodities, currencies, and indices.

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SpotOption says that Digital Contracts are extremely marketable as they offer several advantages to the trader. They have  Negative Balance  Negative Balance In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader places a trade that sharply goes against the chosen direction, an account can incur negative balance. Such exposure is traditionally very risky for brokers. While the foreign exchange market is the most liquid market in the world, unexpected economic, geopolitical or cataclysmic events can always cause a market disruption and consequently lack of liquidity.This has occurred during certain events, albeit limited, which have resulted in extraordinarily sharp movements over short timeframes such as the Swiss National Banking Crisis in early 2015.Negative balances are addressed in many jurisdictions globally and clients in the EU are protected from such risks. As a consequence, brokers are the ones which are exposed to the risks associated with covering the negative balance with a prime broker or a prime of prime. New Negative Balance Protections Look to Shield Market ParticipantsAs a countermeasure to the risk associated with negative balances on a wider scale, many brokers now have since adopted negative balance protections. These mechanisms are an automated adjustment of the account balance to zero in case it became negative after a stop out.Traders operating with a broker that offers negative balance protection often cannot lose more than deposited as this shields both the trader and broker from wider losses in times of crisis. In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader places a trade that sharply goes against the chosen direction, an account can incur negative balance. Such exposure is traditionally very risky for brokers. While the foreign exchange market is the most liquid market in the world, unexpected economic, geopolitical or cataclysmic events can always cause a market disruption and consequently lack of liquidity.This has occurred during certain events, albeit limited, which have resulted in extraordinarily sharp movements over short timeframes such as the Swiss National Banking Crisis in early 2015.Negative balances are addressed in many jurisdictions globally and clients in the EU are protected from such risks. As a consequence, brokers are the ones which are exposed to the risks associated with covering the negative balance with a prime broker or a prime of prime. New Negative Balance Protections Look to Shield Market ParticipantsAs a countermeasure to the risk associated with negative balances on a wider scale, many brokers now have since adopted negative balance protections. These mechanisms are an automated adjustment of the account balance to zero in case it became negative after a stop out.Traders operating with a broker that offers negative balance protection often cannot lose more than deposited as this shields both the trader and broker from wider losses in times of crisis. Read this Term protection (traders can only lose as much as their allocated investment), no margins or  Leverage  Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders need to rely on leverage to make financial trading viable. Generally, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The market which offers the most leverage is undoubtedly the foreign exchange market, since currency fluctuations are relatively tiny. Of course, traders can select their account leverage, which usually varies from 1:50 to 1:200 on most forex brokers, although many brokers now offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. For example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. Likewise, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. With leverage, the potential for profit is clear to see. Likewise, it also gives rise to the possibility of losing a much greater amount of their capital, because, had the value of the asset turned against the trader, they could have lost their entire investment.FX Regulators Clamp Down on Leverage Offered by BrokersBack in multiple regulators including the United Kingdom’s Financial Conduct Authority (FCA) took material measures to protect retail clients trading rolling spot forex and contracts for difference (CFDs). The measures followed after years of discussion and the result of a study which showed the vast majority of retail brokerage clients were losing money. The regulations stipulated a leverage cap of 1:50 with newer clients being limited to 1:25 leverage. Read this Term required, as well as no swap points, rollover, or commissions. They also offer a two-sided, continuous price display, and are being launched together with the new and upgraded SpotOption mobile platform.

The developers emphasis that Digital Contracts were developed in accordance to the regulatory standards of major financial regulators, as the market leaders of the industry convey that these standards are essential for brokerage sustainability.

"Providing the industry with innovative new trading products has always been the focus at SpotOption," says Pini Peter, founder of SpotOption. "This time, developing a product that would comply with regulatory requirements yet not lose the marketability and attractiveness that previous simplified products entailed was the goal. We trust that our Digital Contracts encompass these qualities, and are preparing ourselves for the influx of traders and brokers that they will bring to the industry."

SpotOption recently announced its latest platform version, Spot5, which it will present at the upcoming IFX EXPO in Cyprus, May 23-25. Spot5 focuses on complying with regulation in terms of trading products, as well as offering brokers and traders automated tools for running business activity and trading.