Quick note - Cyprus is actually in the EU now… and has been for some time.
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Hey Bradley… Thanks for that…they seem to get a mention in a lot of Brokers behaving badly posts here on BP.
Maybe their internal financial regulation is more susceptible to foul play…
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That’s exactly the point.
That’s why so many dodgy, unethical and crooked counterparty market-makers who are pretending to be “forex brokers” choose to be regulated there.
It’s basically the same, from their perspective, as being unregulated, because their customers have no real protection at all, but it enables them to say “we’re EU regulated” in all their spammy promotional materials.
That’s the whole value of it, to them.
And that’s why the more warnings there are in forums to advise new traders to avoid “brokers” who are only regulated in Cyprus, the better.
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The original press release calling for evidence says:" relating to the provision of contracts for differences (CFDs), including rolling spot forex, and binary options to retail investors. "
While this is not specified anywhere I can see in the information released today, i’d be surprised if spot forex is not included, since it was specifically mentioned and tied to the CFD element in the consultation period.
That is how I read it anyway. Although it’s absence now is interesting and hopefully meaningful.
Shows what a game FX is then when both Spotware (Ctrader) and Metaquotes (Metatrader) are both headquartered in Limassol, Cyprus…This surely has to be a warning on the industry as a whole…
No real traders involved, No institutions, Just you and the game platform being run by the RFED.
Hello, artisan
That’s how I read it also.
Back in December, I posted the following:
[For emphasis, I have added bold type in your quote (above), and in my quote (which follows).]
And LeapRate appears to interpret that language in the same way, also.
Here is their article on the ESMA announcement:
https://www.leaprate.com/forex/regulations/esma-confirms-30x-max-cfd-leverage-binary-options-ban/
Excerpt (bold type added) –
"The new measures will be published in the coming weeks in the Official Journal of the EU (OJ) and will start to apply one month, for binary options, and two months, for CFDs, after their publication in the OJ.
In brief:
-
Forex and CFD leverage will be limited to 30x, and that just for major currency pairs. Lower leverage (see more below) will be enforced on non-major currency pairs, gold, indices, other commodities, individual equities and cryptocurrencies.
-
Binary Options are banned.
-
Margin close out rule on a per account basis.
-
Negative balance protection on a per account basis."
On related topics, here are two articles from Finance Magnates, reporting comments on the ESMA announcement by two brokers, IG Group and Gain Capital:
Excerpt –
“Most importantly, the ESMA has proven that the fabric of the European Union’s institutions is shifting into a direction that is only welcoming to big corporations with the accompanying lobby groups.”
Excerpt –
“Despite its stated aim to protect individual investors from losing money, some brokers say that the proposed 1:30 to 1:2 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.”
That was my understanding at first. But then I had a look into it. Most of the big and stable (at least, for now) brokers that are regulated by CySec have chosen it simply because Cyprus is kind of a safe haven from the high taxes that most western european countries have.
Their low taxes and fees for companies of all kinds makes that island a great place to develop your business whilst maintaining a high profit margin.
There is no argument that there are some shady companies over there. It’s just that in my opinion they are more of an exception now, rather than the general rule (like it was before the EU).
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I agree with the previous comments. These “draconian” measures will definitely push away the “small” players. I am happy abot the binary options ban (we all know about this pure scam) and the bonus scheme but the other steps are a bit too extreme. Someone is definitely trying to kill the retail business. I guess they don’t need the humble investments of the “little folks”.[quote=“tommor, post:8, topic:142542”]
I don;t need the “help” and “protection” the new customers are said to deserve. I’ll have to explore this “professional account” deal that’s come up.
[/quote]
I completely agree, besides most reputable and serious brokers have a system with which they categorize their clients so if you are a total newbie without any experience and knowledge base, you will not be accepted or at least higher leverage will not be provided. As for the professional account type - isn’t a larger investment required there?
I emailed MarketsWorld today, actually I reached out to them on a live chat and they had this to say
" Jess, I have a question concerning the recent ban from the European Securities and Markets Authority (ESMA) regarding binary options. I’ve read it will be enacted within a month, does this ruling affect MarketsWorld and their clients as well?
Jess
at 10:35, Mar 29:
Due to our licensing as a fixed odds betting service no, we are not currently affected although our licensing and legal team are looking into it at this time"
What do you think about this? They’re the only regulated broker that I know of over seas. I don’t have a large account with them but wanted to see what their response would be anyhow.
Aaaand there is the loophole in the system.
ESMA has banned binaries, but they cannot regulate the betting services. Which is why I fear we may see a resurgence of small scammy betting services.
Note to self - always read the T&Cs, what is the company registered as and double check.
The other thing that I forsee happening very soon, is brokers registering subsidiaries in offshore (unregulated) zones, so that they can continue offering higher leverage rates to their clients.
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Saxo Bank approves of ESMA’s draconian leverage restrictions –
"For the benefit of its long-term survival, the industry should welcome the move away from competition on leverage and embrace competition on quality of platform, price, product and service.” – Kim Fournais, Founder and CEO, Saxo Bank.
CMC Markets expects to avoid negative impacts from the new ESMA rules
by attracting “high-value clients”.
Excerpt from the Finance Magnates article –
“Brokers that are a mix of higher-value clients are unlikely to feel the pinch from the ESMA regulations as hard as those relying on low-value retail clients.”
Finance Magnates’ opinion piece on the probable effects of the new ESMA regs –
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Thanks @Clint, I was just writing something about that Finance Magnates article.
Overall, I feel quite optimistic that these changes will bring some positive and very significant changes to this industry. We all know that most of those who come to high-leveraged retail forex, and who are financially inexperienced, lose their money. And often it is money they cannot really afford to lose.
The problem is mainly due to the non-existence of identifiable reliable, professional, cheap and effective training facilities and mentoring services, combined with a widespread broker mentality that has been feeding off the losses of these types of clients. But, as the article says, brokers will now need to reassess their emphasis in their approach to client acquisition and retention strategy, and their future source of profitability, if they wish to stay in the industry.
There are two important points here: Brokers will be required to provide a negative balance protection and also will need to display in their marketing message what is the percentage of their clients that lose money. Both these requirements are perhaps more significant in causing changes in broker policies than the mere change in leverage (which just means a need for a bigger equity to match the same level of risk exposure). Broker earnings will focus more towards commission earnings instead of the losses from their clients trades. This means brokers will now be looking for long-term clients that are consistently successful and trade larger positions rather than a rapid turnover of failed clients who just end up transferring their small assets to their broker’s bank account.
As the article suggests, these changes may result in brokers competing for the more successful clients and, at the same time, focusing more on helping their clients to succeed by providing better education and advisory facilities and a better level of service overall. All of which is a very positive direction.
Naturally, the threshold for entering the retail sector will probably rise and prohibit the very lowest levels from entering it at all - but is that really a bad thing - even from their own perspective?
My main concern is that these changes may be too big and too rapid and may well lead to a negative disruption in this industry as it tries to adapt to these new requirements without a reasonable time window in which to do so. Perhaps that is a symptom of a situation where changes are late in being introduced in the first place?
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As @anon46773462 and others suggest, there will be changes in the industry.
What form these changes take, remains to be seen. If they mean that the “educators” have to actually Educate, instead of “preaching the narrative” that I suspect will represent something of a challenge for them.
From the interminable posts on this forum, it can be seen that a good many of those seeking to “make their fortune” by somehow magically expecting this fountain of wealth to solve all their future wants, really “should not be allowed out in the street on their own”
Having said that, there are probably a good many who do understand some of the challenges and are genuinely wanting to participate and learn to become proficient. A large increase in “Entry level account sizes” is likely to prevent participation by a good many of these and for others, it is likely to mean that they are now forced to risk more money than they can realistically afford to lose.
Rather than risking “Pocket money”, I forsee a situation where many now have to commit to loans or “max out” Credit sources to participate.
Rather like the “Banking scandal” which caused the crisis a few years ago, instead of blaming those responsible (Irresponsible financial industry members) the damage will be visited on those who wish to participate, but are prevented from doing so by the new “Regulations”.
It is a little early to make a real forecast of what will happen here, but the “tightening of credit for their own good” which those Regulations produced, forced the borderline cases (and many who were a little above “borderline”) are now forced in to the hands of “Payday Loan Sharks” and pay interest rates of 1500% or more !
It also springs to mind that the survival of sites such as the one we participate in, may be in some doubt now.
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That thought occured to me, too…
I Completely agree with you on this one.
Why do you guys think that? Is it because these new regulation rules could push away the retail trading and the use of sites like this will be pointless?
[quote=“sebastiano, post:27, topic:142542”]
Why do you guys think that? Is it because these new regulation rules could push away the retail trading and the use of sites like this will be pointless? [/quote]
Hi Sebastiano,
Only to the extent that this site is aimed primarily at Newbies and that the new regulations will inevitably reduce the volume of newcomers. I think there are several reasons why this will happen:
The reduced leverage maximums will require either a significantly larger equity from the trader or much smaller position sizes - both of which reduce the ability/desirability of small accounts. (which in my opinion is a good thing and will hopefully decrease the percentage of losing accounts - and thereby reducing the concerns of regulatory authorities that lead to these kinds of restrictive changes!). This effect is further aggravated by the prohibition of bonus-type offers that artificially inflate the available equity for trading…
The fact that brokers will have to publish the number of accounts that lose will encourage them to aim for successful accounts and refuse probable losers - again the small balance Newbies. (I don’t know how this will be done - it sounds a rather difficult thing to define as there are many reasons why an account may be closed)
The brokers will also have to provide negative equity protection which will again encourage them to aim for larger equity, successful accounts rather than the more risky small balance Newbie accounts.
Having said that, it is clear that quite many experienced traders do not post very much, or stay here for very long, because of the monotonous repetition of very basic questions. This may well change for the better if the client base starts to include more conscientious, industrious and serious newcomers with a larger equity “at risk” 
Just some thoughts…
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30:1? very good choise.
anything above 50:1 is too much, anything below 3:1 is too little.
30:1 is a very good leverage to work with.
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Hey Manxx, thank you for your reply. I do agree with you, your thoughts sound quite logical. The good news is that bonus campaigns and too high leverage levels like 1:500 or 1:1000 will be eliminated. In my opinion trading with such high levels is not even real.
As for the negative equity protection, I think that the larger the account the bigger the risk, but if we follow the common sense and logic lets assume that traders with such accounts should be more experienced and educated. My broker offers negative balance protection for a few months now so I was expecting this measure to be imposed to all the others as well.
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[quote=“Manxx, post:28, topic:142542, full:true”]
the reason why experienced dont stay here and/or dont post is not the noobs. the main reason is the half knowlagable stubborn people who - once they hear something they dont understand or disagree with - start crusades of missinformation which leads that any cnverations gets pulled down to personal opinions and sometimes insulting. the people who post thinking they know but in truth got a lot wron, and thereby spread wrong knowledge and get upset when someone comes and tries to tell them they are wrong. thats the main reason why experienced dont post, its just too much work and doesnt pay off to fight stubborness.
thats very bad for new people, since the stubborn are the loude ones, and the experienced the quite ones (who as well dont read or hang out here) and the new people learn from scratch from the loude ones who dont have anything useful to offer.
no finger pointing at anyone, just my opinion.
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