CySEC Scraps Higher Leverage, Adopts ESMA Rules

The Cypriot regulator weighed up offering three tiers of leverage to retail clients in May

On Friday afternoon the Cyprus Securities and Exchange Commission issued a statement saying that it has made permanent the regulations introduced by the European Securities and Markets Authority last August.

The regulatory body said that leverage is now capped, with highs of 30:1 on major currency pairs and lows of 2:1 on cryptocurrency available to retail clients.

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Brokers will also have to put negative balance protection measures in place and won’t be allowed to provide welcome bonuses to market their services.

The move to adopt ESMA’s measures marks something of a shift on the part of CySEC.

Binning the consultation paper

In May of this year, the Cypriot regulator released a consultation paper, saying that it was weighing up adopting a different set of regulations to those put forward by ESMA.

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Though they also restricted certain marketing practices, those regulations would have allowed retail clients to trade with 50:1 leverage if they met a certain set of criteria.

But in the statement it released on Friday, CySEC said that it would not be adopting those rules.

“Further to [the consultation paper in May] which consulted interested parties on the proposals for [Cyprus National Product Intervention Measures], and for the avoidance of doubt, CySEC has not imposed a risk-based approach to leverage limits,” said the regulator.

With CySEC having ditched its plans for higher leverage, the rules being introduced by the regulator are almost identical to ESMA’s. The only difference between the two sets of regulations pertains to risk warnings.

Cypriot firms that have less than twelve months of trading data will have to put a block of text on their websites saying that “the vast majority of retail client accounts lose money when trading in CFDs.”

In contrast, ESMA states that brokers must say what percentage of traders lose money when using their services – something that Cypriot firms that have more than a year of client trading data now also have to do.

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