The Cyprus Securities and Exchange Commission (CySEC) is taking substantial steps to increase client protection with its new regulations. The regulator is set to introduce a new set of requirements that limit the maximum available leverage to clients to 1:200 for experienced traders and 1:100 for novice clients of retail brokerages.
The news comes as the European regulators have continued to ramp up pressure on the industry to encourage more responsible trading from clients. The French AMF has introduced guaranteed stop loss requirements as part of its advertisement ban on financial services, while the German BaFin regulator mandated negative balance protection.
Exness has been offering very high leverage to its clients, with the latest step taken by the company introducing ‘unlimited’ leverage. After the company has been offering tiers of leverage including 1:1000 and 1:2000, the firm introduced its ‘unlimited’ offering in March last year.
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The changes are set to take effect on the 31st of January 2017, introducing a default tier of 1:50 with experienced traders allowed to change the levels to a higher ratio. Clients that do not agree with the new terms and conditions are asked to send their requests for account closure to the broker’s support email.
Exness outlines in its statement: “The new measures introduced by CySEC are an important step toward maintaining an environment of trust and security for clients to trade within. As an EU regulated broker who has always adhered to the highest regulatory standards, we align ourselves fully with these new regulatory changes.”
Higher leverage is typically closely correlated with increased client losses, according to studies conducted by various online brokers. The higher the risks that a client takes with the balance available on the account, the higher the probability for the account to hit a margin call which results in the automatic closure of open positions.