According to an announcement published by the Monetary Authority of Singapore (MAS), the overreaching arm of one of the strictest financial regulators in the world has reprimanded CMC Markets.
The MAS highlighted in its announcement that the Singapore arm of CMC Markets has committed violations in relation to the “Financial and Margin Requirements for Holders of Capital Markets Services Licenses Regulations.”
CMC Markets has violated a requirement related to the appropriate margin requirements on certain contacts.
The mandatory minimum margin requirements for equity CFDs are 5% for indices, 10% for index stocks and 20% for other stocks. Alternatively, foreign exchange (FX) CFDs have a floor at 2%.
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In addition, the regulatory framework that CMC Markets violated states that CFD contracts, which do not have a guaranteed stop loss, have to cover additional special requirements. The maximum loss that a customer may incur between the contract price and the stop-loss price may not surpass 30% of the minimum margin for the CFD position on account.
For CFDs that are with guaranteed stop loss the same amount totals to no more than 10%.
CMC Markets has failed to comply with the regulations mentioned above for one of its clients between the 12th of November, 2012 and the 17th of February, 2014. The MAS announcement doesn’t specify which specific CFD trading margin the broker violated.
Looking at these new requirements, it would be interesting to see if there were CFD positions in the EUR/CHF pair at CMC Markets Singapore. In theory, regardless of whether the stop losses on client accounts were guaranteed or not, clients of the broker may dispute the outcomes if they have negative balances.
This would apply however, only if the clients of the broker were trading CFDs on spot FX rates.