With the August 1st implementation date of the European Securities and Markets Authority’s (ESMA) contracts for differences (CFDs) legislation fast approaching, many brokers are considering moving offshore or leaving the market altogether. Some firms, however, see the new regulation in a positive light.
easyMarkets is one such firm. The company issued a statement this Friday that essentially welcomed ESMA’s new rules and said the company would be fully compliant with the legislative changes by the time they go into effect.
For those not in the know, ESMA has been directing its attention towards binary option and CFD brokers. The supranational regulator’s new regulation will ban the sale of binary options to retail investors and place severe restrictions, including leverage caps and negative balance protection, on CFD trading.
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In its statement today, easyMarkets claimed that they were not fearful of the legislation as they were already partially compliant before it was announced. The firm has offered negative balance protection since its founding in 2001.
On top of this, easyMarkets noted that it does not use high leverage as a means of attracting customers. The company claimed that it focuses on technology, customer support and transparency to attract and keep clients.
Whether there is any merit to this claim is uncertain, but there is certainly a logic to the other parts of the firm’s statement that support it. High leverage attracts clients and makes brokers money, but it also means a customer has a short life-cycle – most clients trading with high leverage will have emptied out their account within three months. If hypothetically, clients could be induced to trade without using high leverage, they would likely trade for a longer period.
Evdokia Pitsillidou, easyMarkets’ Director of Risk Management, supported the company’s claims as she discussed the new regulation. “We not only support this initiative,” said Pitsillidou, “but as an organization promote [sic] risk management, trader education and responsible investing practices through the service and tools we provide our clients.”