ESMA -- The World's New #1 Nanny Regulator

[tommor]

If something bad occurs outside their jurisdiction, why should they care?

[Clint]

"ESMA has adopted these measures in the official languages of the EU and they will remain in force for a period of three months from the date of application.”

So much noise and chaos just for 3 months?! I don’t believe that

Yesterday, Finance Magnates published an opinion-piece agreeing with you –

ESMA Has No Intention to Review Leverage | Finance Magnates

Here’s an excerpt –

The amount of work which the European regulators have put into devising the new regulatory framework speaks for itself. There would be little reason to waste so much effort just to introduce a regulation for three months. If anything, ESMA is using the three month product ban rule merely as insurance that all of its actions adhere to the pan-European financial regulatory framework.

[tommor]

Absolutely. If the regulator didn’t think it was the right response to the situation, they wouldn’t have introduced it in the first place.

[whywescalp]

Absolutely. If the regulator didn’t think it was the right response to the situation, they wouldn’t have introduced it in the first place.

I wish regulators are that smart.

[sebastiano]

Exactly, as in the article is mentioned “ESMA’s Regulatory Framework Took 2 Years”, it won’t make any sense if they revise the changes after all this work.

I wish regulators are that smart.

They are smart but do not care about the ordinary masses’ interests.

[Clint]

This opinion-piece appeared today in Finance Magnates. The author, Craig Paton, is an industry insider, and his article discusses what retail forex brokers in the E.U. can do to preserve their profits, in the face of troublesome new ESMA regulations.

Make or Break: How Brokers Can Cope with ESMA Restrictions | Finance Magnates

[Manxx]

From the above article posted by @Clint :

“With an average client life of 60 days (more like 30) the constant need for clients and regular capital inflows does not come from the sales team, it’s marketing.”

There is something kind of disgusting and sordid about any business that needs to feed off its customers in order to survive - and has to spend its time and energy enticing a constant flow of fresh victims into its web and sucking them dry.

Gives me a feeling of financial arachnophobia…

The basic premise for any long term business success, with any sense of social value, should surely be a win/win between provider and customer?

[Trendswithbenefits]

There is something kind of disgusting and sordid about any business that needs to feed off its customers in order to survive - and has to spend its time and energy enticing a constant flow of fresh victims into its web and sucking them dry.

I have pointed out this malevolent business model in at least 10 posts, across many threads over the last 12 months… Market Makers… complete with a sense of Social Value… come on… really…

[Manxx]

Market Makers… complete with a sense of Social Value… come on… really…

I think you are focusing on a limited view of market makers. Retail forex market-making is a very different, and limited, area of market making.

For example, if you are a company in an international environment then you need somewhere where you can exchange currencies in order to do your business…but you also need something that is even more important than the actual transfer - you also need the confidence that you always can exchange currencies and at an anticipated reasonable level. And that is the market-makers’ role.

The interbank market-making industry is a service that enables international trade to flourish with confidence and great efficiency and diversity. That is a global benefit to everyone.

But,as we all know, the retail forex market is a billion light years away from that kind of market-making. Probably 99.9% of retail brokering serves no additional purpose than earning brokers money and giving traders a speculative gambling pastime that is no different to corner shop “fruit machines” and just as certain to fail.

But I am fairly sure that this does not mean that the brokers are automatically the villains of the situation and aggressively cheat retail traders out of their money (although we all know that at the bottom of the bucket there are those types) and why? because probably those 80% who lose their money lose it through their own incompetence and näivity. The broker just has to get them in and wait.

I think it is an absurd thought that a broker would employ staff or develop programs that seek out and trade against individual traders with their 2 microlot positions. They cannot have individual price feeds for each and every trader (although spreads may well be a different matter, but even that is a somewhat limited “weapon”)

But my point was that any industry that survives purely on the failure of its customers and has to seek a constant supply of fresh meat is somehow grotesque and pointless. But a retail broker does not have to function like that. It is their job now to develop into something that has add-on value for both broker and trader - and that is possible…isn’t it?

[mlawson71]

The European Securities Markets Authority (ESMA) announced this week it is renewing the restrictions on CFDs trading for another three months as of February 1, 2019. The pan-European regulator also implied that it will monitor closely forex brokerages, as it has identified certain malpractices. The regulator also implied it is possible to introduce “other Union measures” it deems appropriate.

[tommor]

As long as no unnecessary minimum account size for spreadbetting isn’t on the horizon I’m happy with all this.

[A1lenTrader]

Couldn’t they just put a notice on the broker sites like they have done with online casinos and other rip off online slots sites, like…

" When the fun stops… STOP "

Seems to be good enough for them.

[tommor]

Forex isn’t a casino, and the UK-based FCA-regulated spreadbetting firms aren’t rip-off merchants.

[A1lenTrader]

Your still betting …
Just because it’s not regulated by the gambling commission doesn’t mean it’s not gambling because it is.

[tommor]

Let’s not get into what’s gambling and what’s not. Regardless of all that issue, I believe there is one reason why traders lose money and that’s because they trade like prats.

But if you have some good evidence on the other hand as to why forex is a casino and why particular firms are rip-off merchants, it would be a great service to all if you could post it up here.

[A1lenTrader]

What are you going on about …!
I said couldn’t the brokers just put a notice like the casinos and online slots do …!
So instead of taking away the leverage and pushing up the margin levels just put a notice like they do.
And it is Gambling full stop.!

[tommor]

From basics - there are two types of gambling -

Type a) - lottery / roulette / coin toss / dice roll etc. - the player has no input available which might affect the outcome of the game (except the size of the stake)

Type b) - poker / blackjack / trading / business / life - the player has inputs available which might (positively or negatively) affect the outcome of the game apart from the size of the stake

What is it structurally about forex or spreadbetting which places it in Type a) and not Type b)?

NB. Here’s a clue - the % success rate amongst punters is an irrelevant factor.

But it would seriously help everyone if you have information about malpractice by specific brokers or spreadbetting firms if you would share it.

[A1lenTrader]

Take your head out of your own arse for a minute

1 i never mentioned malpractice
2 my point was couldn’t they just do what the casinos do and put a post on there sites telling people “Punters” that “When the fun stops STOP”

OK ,

[tommor]

You suggested forex and specifically spreadbetting were gambling. That would be malpractice as these are activities in which the trader does have opportunity to make inputs which can affect the outcome of the game. Removal of that ability would reduce the game to a roulette-type game (for punters, not traders). Which it isn’t.

[mlawson71]

The Dutch financial regulator AFM announced its plans to make the product intervention measures of the European Securities and Markets Authority (ESMA) permanent. These measures are supposedly aimed at guaranteeing greater investor protection for retail investors across the EU, and include ban on binary options trading and a number of restrictions on CFD trades, including a leverage cap of 1:30.