The consultation has already opened and only runs until 05/02.
Get the ESMA call for evidence and the questions they invite answers to with this link -
PS: The ESMA initiative DOES include financial spreadbetting although this is not specifically named.
I would be happy to see negative balance protection but a cut in leverage from as high as 500:1 for the majors would be a serious knock.
Grrrrr!
I agree with all of the new regulations, but as you said, leverage being cut to less than 1:30 would be an issue.
To put 1:30 into prospective lets run an example of the typical day trader?
You have a $1,000 account, denominated in USD with a maximum allowable leverage of 1:30. You decide to risk 3% on a single trade in GBP/USD using a 25pip Stop Loss with a target 2 pip Spread. The current FX rate for GBP/USD in this example is 1.5000
Your margin in this case would be $555.56, or 55.56% of your account balance. That’s one trade which you’ve risked 3% of your account balance on, and yet over 50% of your account is tied up in margin (providing the initial margin remains the same rate as maintenance margin - according to the ESMA report initial margin and maintenance margin will be one of the same with no difference. Not good news).
I suspect if this goes through I’ll be moving to DMA sooner than I had expected, spreadbetting will become pointless.
Hopefully they will get enough of a push back from clients and brokers alike that they settle at 1:50, as mentioned by the initial FCA proposal.
In all honesty though, 1:30 would not hinder any of the trading that I’m currently doing as I rarely have more than 3% on the table at any one time. Historically the maximum leverage I have employed on a single trade came in at just over 1:11.
Oh well - regulation to protect us or regulation to control us…
Quite possibly.
And that 1:50 being the law in America may have some influence (though they’ll never admit that openly).
It’s sometimes hard to distinguish.
But this is what happens to industries full of crooks, and nobody can deny that the spot forex trading industry is full of crooks.
The people who’ll complain most about this aren’t ever profitable traders, anyway.
Not profitable! Speak for yourself maybe.
I certainly don’t appreciate ESMA trying to protect me by taking away an affordable means of access to the markets like I’m some toddler playing with matches.
Thanks for that RoF - a couple of those measures like negative balance protection, may be helpful - no doubt the “brokers” will put in “balancing” measures to limit their own maximum payouts.
A lot of “Borderline brokers” will not be affected that much as they will just drop the “FCA approval” and offer higher leverage in any case imo.
[Edit - but NOW they will have a plausible excuse ! ]
Does that mean spreadbetting is under the control of FCA ? - I was under the impression that being classifed as “Gambling” that would be likely to be exempt ?
As far as I understood, and I may be wrong, it makes no difference if you are FCA regulated or regulated by any other form of European organisation. If you’re based in Europe as a broker of any type offering CFD’s or derivative products then you must by law follow the ESMA regulations. Also, as I gather, the FCA were waiting on ESMA. So essentially, ESMA trumps FCA in this case.
I think Spread Betting is out of scope - as you mentioned it’s regulated by the gambling authority, not the FCA. But as ever, lets see how it all works out.
Edit: It appears I was wrong, Spread Betting is in fact a CFD.
Date: 10 Jan 2018
The Financial Conduct Authority (FCA) said it “uncovered areas of serious concern” in the contracts for difference market, which is a type of betting on financial products banned in the US, but legal in the UK with a severe health warning. CFDs are a type of high-risk, complex derivative that allow investors to gamble on the price of an asset without owning it.
Shares in London-listed Plus500 fell by almost 5%, CMC Markets was down by nearly 4% in early trading and IG Group lost almost 5%. The intervention follows repeated warnings from European regulators about the risks posed by CFDs and a crackdown on the market.
In a letter to the industry after a year-long review, the City watchdog said it found…
##… 76% of consumers had lost money on CFDs between July 2015 and June 2016
Source: Spread-betting industry may have put customers at risk of harm, says FCA | Business | The Guardian
For so long as we “Remain in EU” - yes.
There are other continents and offshore islands seeking “cash flow opportunities”
This is true, and when we are out there ‘could’ be room for scope here to go against the grain of the ESMA.
This could be a way to make London the capital of the financial markets again by offering 1:100 leverage once again 
I wouldn’t place too much reliance on “The Guardian” RoF
I’m just sticking my finger in the air with regards to how spread betting is classified - never using it myself. But, i’d be surprised to see no material changes taking place in that area also. I’d be keen to follow this and see what the outcome is.
No, its very definitely under the FCA.
Not exempt - it’s FCA-regulated (and generally well regulated, these days).
Times must have changed since I looked into it 7 years ago with IG Index - although there were suggestions at the time that regulation was changing to the FSA, now FCA from the Gambling Authority.
FCA regulate a spread bet because they define same as a CFD.
FCA voiced concerns back in early 2017 on the high number of losers, they decided to put a hold on any action in June to await the EU action.
The FCA thinking is broadly similar to the EU approach, membership of EU is irrelevant, the FCA can act on their own if the so choose, they indicated back in June that should there be delays to Esma’s action, the FCA will reconsider making final rules in the first half of 2018.
First report of the ‘FCA Crackdown’ was in Dec 2016 - headline on Dec6 2016:
FTSE 100 rises but spread betting firms plunge 40pc after City watchdog clamps down on CFD trading
Thanks Peterma, so it appears my second guessing for spread betting providers was correct in the first instance, not a bad ‘finger in the air’ 
Ok it seems the deffinitions have changed for regulation then - Do HMRC still consider spreadbetting to be gambling, but not CFD’s ?
Personally I can see very little difference.