FXCM Reveals Take on Proposed ESMA Rules, Deems Leverage Cap Too Restrictive
- Those not able to deposit the necessary margin capital might be tempted to use offshore firms.
The European Securities Markets Authority (ESMA) continues to receive responses to its proposals to limit the sale of risky trading bets to retail investors. FXCM Group shows a similar reaction to its industry peers by voicing concern over the proposal to cap the maximum Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term, saying the limit is highly restrictive and discriminates against retail traders.
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Thus far, the common conclusion among Europe’s regulated Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term brokers is that ESMA is setting up an anti-competitive environment as the proposed leverage is an arbitrary, low number. Indeed, a cap of 5:1, which ESMA recommends for highly volatile assets, will be the lowest of any forex regulator in the world.
Last week, ESMA indicated that it is considering a range of product intervention measures such as leverage restrictions, banning binary options, guaranteed limits on client losses and/or restrictions on the marketing and distribution of these products.
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FXCM said that it has been in full compliance with most of the proposed rules. The company stated: “We do not offer binary options, and do not provide ‘top-up’ bonuses. We have always had an auto-liquidation process when minimum margin requirements are not met and we have always protected clients from debit balances.”
FXCM is therefore fully supportive of ESMA in its intentions to improve consumer outcomes across the industry and believes that consumers will benefit from the measures currently being discussed and from harmonisation of regulation.
However, the company acknowledged that although it agrees that a lower leverage produces better outcomes for clients, “the proposed leverage limitations are more restrictive than what is allowed in other jurisdictions, including the US and Australia.”
Despite its stated aim to protect individual investors from losing money, some brokers say that the proposed 1:30 to 1:5 leverage will increase the traders’ risks, because they will need to deposit more capital upfront that they could potentially lose. In addition, those not able to deposit the necessary margin capital might be tempted to use offshore market makers in loosely regulated jurisdictions.
The European Securities Markets Authority (ESMA) continues to receive responses to its proposals to limit the sale of risky trading bets to retail investors. FXCM Group shows a similar reaction to its industry peers by voicing concern over the proposal to cap the maximum Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term, saying the limit is highly restrictive and discriminates against retail traders.
Discover credible partners and premium clients in China's leading event!
Thus far, the common conclusion among Europe’s regulated Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term brokers is that ESMA is setting up an anti-competitive environment as the proposed leverage is an arbitrary, low number. Indeed, a cap of 5:1, which ESMA recommends for highly volatile assets, will be the lowest of any forex regulator in the world.
Last week, ESMA indicated that it is considering a range of product intervention measures such as leverage restrictions, banning binary options, guaranteed limits on client losses and/or restrictions on the marketing and distribution of these products.
[gptAdvertisement]
FXCM said that it has been in full compliance with most of the proposed rules. The company stated: “We do not offer binary options, and do not provide ‘top-up’ bonuses. We have always had an auto-liquidation process when minimum margin requirements are not met and we have always protected clients from debit balances.”
FXCM is therefore fully supportive of ESMA in its intentions to improve consumer outcomes across the industry and believes that consumers will benefit from the measures currently being discussed and from harmonisation of regulation.
However, the company acknowledged that although it agrees that a lower leverage produces better outcomes for clients, “the proposed leverage limitations are more restrictive than what is allowed in other jurisdictions, including the US and Australia.”
Despite its stated aim to protect individual investors from losing money, some brokers say that the proposed 1:30 to 1:5 leverage will increase the traders’ risks, because they will need to deposit more capital upfront that they could potentially lose. In addition, those not able to deposit the necessary margin capital might be tempted to use offshore market makers in loosely regulated jurisdictions.