Potential mass exodus from Spreadbetters.

[mpups]

thanks for the info guys

 

[jm1054]

I suppose that makes it clear. I sent my reply to ESMA saying that SB is an affordable way for people to learn how to trade as many can't afford DMA. I said the proposal is essentially unfair.

I've just submitted my reply too, said pretty much the same thing.

Ironically, increased margins won't stop someone with a large account losing a fortune, if they're intent on doing so!

I hope this isn't a "and so it begins" moment. I've always felt spread-betting was too good to be true and guessed that it wouldn't always be around in its present form. Let's hope I'm wrong.

Alternatively, there's a pretty good chance that the big companies like IG will come up with an affordable solution, otherwise it'll hit their profits massively!

 

[Dowser]

Let's see how creative they get in the face of this onerous regulation. What's to stop brokers splitting their businesses up to accommodate retail and professional clients - opening offices up in locations outside the jurisdiction of ESMA and FCA to cater for us small fry.

 

[mpups]

I've just submitted my reply too, said pretty much the same thing.

Ironically, increased margins won't stop someone with a large account losing a fortune, if they're intent on doing so!

I hope this isn't a "and so it begins" moment. I've always felt spread-betting was too good to be true and guessed that it wouldn't always be around in its present form. Let's hope I'm wrong.

Alternatively, there's a pretty good chance that the big companies like IG will come up with an affordable solution, otherwise it'll hit their profits massively!

Hi JM, its interesting that this subject prompted your second post in 8.5 years!

 

[jm1054]

Its interesting that this subject prompted your second post in 8.5 years!

Haha! Yes, been keeping my head below the parapet, happily spread-betting and making the most of the leverage!

 

[Sonicscooter]

Just had a lengthy conversation with a very knowledgeable gentleman at IG, in a nutshell and getting to the point, the regulators feel there are two groups of trader, the "professionals" who have liquid assets (not property), ie shares, cash bonds etc minimum of £442,000, and then there are the rest, us included, no kudos for learning the trade or having spent decades buying and selling shares, just one of the masses, and this isn't IG or other companies, this is the FCA's opinion.

So from my take on things as IG make most of their money from a very small number of high worth individuals, not us, £2 a point on the DAX doesn't cut it i'm afraid, they won't be hit that hard if we don't trade any longer, this is going to go one of three ways, 1 to trade CFD's and spread bet you will need to have £442,000 in liquid assets, or 2, margins will go up vastly and markets traded will reduce especially for new accounts, 3, we are all extinct.

Regards Shane.

 

[jm1054]

So from my take on things as IG make most of their money from a very small number of high worth individuals, not us, £2 a point on the DAX doesn't cut it i'm afraid, they won't be hit that hard if we don't trade any longer, this is going to go one of three ways, 1 to trade CFD's and spread bet you will need to have £442,000 in liquid assets, or 2, margins will go up vastly and markets traded will reduce especially for new accounts, 3, we are all extinct.

Regards Shane.

Oh dear, that doesn't sound too good!

Thanks for the info

 

[tomorton]

Just pulling some official links together which might be useful -

ESMA issues updated statement on preparatory work in relation to CFDs, binary options and other speculative products offered to retail clients: 15 December 2017
https://www.esma.europa.eu/press-ne...paratory-work-in-relation-cfds-binary-options

FCA statement on ESMA’s ongoing work on possible product intervention measures applicable to retail CFD and binary option products: 15/12/2017
https://www.fca.org.uk/news/stateme...roduct-intervention-retail-cfd-binary-options

ESMA call for evidence – potential product intervention measures on contracts for differences and binary options to retail clients: 18 January 2018
https://www.esma.europa.eu/press-ne...ntial-product-intervention-measures-contracts

ESMA press release re call for evidence:
Potential product intervention measures on contracts for differences and binary options to retail clients: 18 January 2018
https://www.esma.europa.eu/sites/de...easures_on_cfds_and_bos_to_retail_clients.pdf

ESMA press release:
ESMA consults on potential CFD and binary options measures to protect retail Investors: 18 January 2018
https://www.esma.europa.eu/sites/de...-99-930_pi_call_for_evidence_january_2018.pdf

FCA letter to CEOs expressing concern at industry failings and pointing to ESMA consultation: 10 January 2018
https://www.fca.org.uk/publication/correspondence/dear-ceo-letter-cfd-review-findings.pdf

The specific questions asked by ESMA in their call for evidence are as follows: obviously, some of these are intended for the product provider companies only –

Questions
A: Do you think that ESMA has adequately identified the instruments in the scope of its possible measures (paragraphs 3 and 5 above)?

B: What impact do you consider that the introduction of leverage limits on the basis described above (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

C: What impact do you consider that the introduction of a margin close-out rule on a per-position basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

D: What impact do you consider that the introduction of negative balance protection on a per-account basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

E: What impact do you consider that a restriction on incentivisation of trading (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

F: What impact do you consider that a standardised risk warning (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

G: Please provide evidence on the proportion of retail clients that use these products for hedging purposes and how the suggested measures will affect them.

H: What impact do you consider that a prohibition on providing binary options to retail clients would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

I: What impact do you consider that the envisaged measures would have on retail investors?

J. Do you believe that specific restrictions concerning CFDs in cryptocurrencies should be introduced? In particular, what impact do you consider that assigning a leverage limit of 5:1 to such CFDs would have on firms’ business and / or any expected additional benefits for retail clients? How would such an impact compare to that from the possible alternatives of lower leverage limits such as 2:1 or 1:1, or a prohibition on the sale, marketing and distribution of such CFDs? Please describe and explain any one-off or ongoing costs or benefits.

Closing date 05/02.

 

[tomorton]

........this is going to go one of three ways, 1 to trade CFD's and spread bet you will need to have £442,000 in liquid assets, or 2, margins will go up vastly and markets traded will reduce especially for new accounts, 3, we are all extinct.

Regards Shane.

Hi Shane -

This initiative is all about derivatives so isn't there a 4th option, move to DMA? Or is that not viable?

Tom

 

[Sonicscooter]

Hi Shane -

This initiative is all about derivatives so isn't there a 4th option, move to DMA? Or is that not viable?

Tom

Suppose so, not something i've looked at, at any length, was always happy with where i was, have you looked at ETF's as IG cover those.

 

[tomorton]

Suppose so, not something i've looked at, at any length, was always happy with where i was, have you looked at ETF's as IG cover those.

Well I'd been hoping for a time now that I would be turning over such an amount of SB trades that it would become financially worthwhile to shift to DMA. Just that I hadn't planned to do it yet and have never even approached a DMA broker for T&C etc.

I don't think a 6-figure deposit is required - anyone know more about this?

 

[kalott]

Looking at the glass half full (not whiskey)

a negative balance protection would be the only positive thing about this changes
you cant get that with real futures

 

[Sonicscooter]

This article seems somewhat balanced...

https://www.professionaladviser.com...ulator-weighs-cfd-crackdown-after-fca-warning

 

[Jason101]

Have Your Say Now Before it's to late!!!

If you are reading this thread and want your say in the consultation then do this...

1. Answer the ESMA's call for evidence on their Responce Form found on this page.

https://www.esma.europa.eu/press-ne...ures-contracts#registration-form_consultation

2. On the drop down tab enter "Individuals"

3. Under ‘Institution’ type ‘N/A’

4. Attach (upload) a brief or detailed complaint about the proposed margin changes. Using Microsoft Word or Excel.
(or any over pdf txt doc docx xls xlsx ppt pptx pps ppsx odt ods od format)

That's it your done. Have your say in under 5 mins.
You have until the end of the day Paris time on Sunday 4th February.

 

[Dowser]

From the Telegraph today:

'EU crackdown on 'crazy' amateur trading has gone too far, IG Group warns'

http://www.telegraph.co.uk/business...-amateur-trading-has-gone-far-ig-group-warns/

 

[jm1054]

From the Telegraph today:

'EU crackdown on 'crazy' amateur trading has gone too far, IG Group warns'

http://www.telegraph.co.uk/business...-amateur-trading-has-gone-far-ig-group-warns/

Thanks for sharing. Unfortunately, we're not going to get much sympathy from the "enraged wealthy client base", or readers of the article.

Off-topic, but trust the Telegraph to blame the EU. Brexiteers will lap that up! I understood that the FCA would have already made the changes if it wasn't for the ESMA, but happy to be corrected...

 

[Dowser]

I understood that the FCA would have already made the changes if it wasn't for the ESMA, but happy to be corrected...

I think you're right, CMC markets was considering moving operations to Germany because it believed future regulation would be less draconian there...

 

[wallstreetking]

For those that are risking less then 2% of their trading capital on a single trade.. this new set of regulations shouldn't really matter.

 

[sminicooper]

The basic problem is that "a fool and his money are soon parted". You can impose whatever rules & regulation you like but it won't cure the problem. It will most likely inconvenience serious traders; but what's new about that - the market's always done that to us hasn't it?

 

[kalott]

For those that are risking less then 2% of their trading capital on a single trade.. this new set of regulations shouldn't really matter.

whats maybe matters is how this will affect their profit (IG and others)?

someone will still have to pay their profit?