Forex.com, owned by GAIN Capital, sent a message to clients, providing information pertaining to newly proposed regulatory confinements issued by the European Securities Markets Authority (ESMA).
The message, which was sent by Forex.com CEO Glenn Stevens, urges clients to send feedback to the regulator in an effort to prevent the measures: “You have until 5th February to respond to ESMA, and we would strongly encourage you to do so. ESMA does listen to the views of traders and will shape its final decision according to the feedback it receives.”
The company also insinuates that client feedback can be sent directly to ESMA, or alternatively to the company, which will then forward the information to the regulator. Forex.com’s message to clients also suggests: “It’s very important that traders share their views on these proposals. With your help, we can ensure the industry is fair to all.”
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Last week, ESMA suggested additional regulatory restrictions that are meant to protect investors and their corresponding portfolio funds. In a statement issued by the regulatory body, the suggested changes to trading conditions include limited leverage across various trading instruments and assets. More specifically, ESMA is considering limiting the leverage for currency pairs to a maximum of 30:1. They also recommended lowering the leverage on indices to 20:1, several commodities to 10:1, and equities to 5:1.
Moreover, the regulator is attempting to establish a market-wide universal stop-out level, to be matched by all brokers, while also offering clients negative balance protection. As it currently stands, brokers can independently decide on their clients’ stop-out levels, which can sometimes work against traders. The ESMA would like to regulate the margin level at which positions begin to get closed out, due to insufficient margin. The negative balance protection would ensure that clients cannot lose more than their deposited funds, regardless of market volatility.
Global regulation across the FX market has recently become significantly more strict. Brokers have been limited in their ability to offer promotional incentives, including bonuses, and have had their once highly appealing trading conditions curbed, as regulators attempt to ensure investor protection. Brokers are now attempting to prevent additional restrictions from the ESMA.