IG issues update to clients on pending changes to trading conditions due to new ESMA rules

Maria Nikolova

There will be a raft of changes, including adapting to new margin requirements over the weekend, the broker warns.

As the start of August gets closer, so does the implementation of the new rules for CFD offering to retail clients specified by the European Securities and Markets Authority (ESMA) earlier this year.

One of the major electronic trading companies in Europe and the UK – IG Group Holdings plc (LON:IGG) has already complied with the ban on binary options offering to retail clients in the UK and EU. It is now seeking to provide timely updates to retail traders about the pending changes related to the CFD offering.

Earlier today, the company posted a special article “How will the new ESMA rules affect my IG account?”, elaborating on the pending changes. The process has already begun but the majority of changes are set to be applied over the weekend.

Saturday July 28, 2018

Margin Changes – Margin requirements to open and maintain leveraged positions was one of the crucial aspects of the ESMA regulations. In particular, the leverage limits on the opening of a CFD position by a retail client vary from 30:1 to 2:1, according to the volatility of the underlying:

  • 30:1 for major currency pairs;
  • 20:1 for non-major currency pairs, gold and major indices;
  • 10:1 for commodities other than gold and non-major equity indices;
  • 5:1 for individual equities and other reference values;
  • 2:1 for cryptocurrencies;

On Saturday, July 28th, new margin floors will be implemented across all ESMA retail accounts for all new positions. Existing positions will keep current margin rates.

For clients contracting with one of IG’s European branches (Germany, France, Spain, Sweden, Italy), all options will be margined at the higher of maximum risk or underlying margin rate. This is a significant change for option buyers who have previously only had to deposit the risk.

Negative balance protection – All retail clients contracting to ESMA regulated entities will have negative balance protection applied to their account.

Offsetting long and short positions – If a client is currently long and short a particular market then they will currently pay 10% of either leg. From July 28, 2018, clients will have to pay 100% of the ESMA margin on each position. This change will only apply on new positions, therefore if a trader is currently long and short the same market then he/she will continue to receive the concession.

Rollovers – When Retail clients futures contracts rollover and a position is opened after July 28, 2018, then the new position will be margined basis the ESMA minimums.

Concessions – The new ESMA regulations mean that retail clients will no longer receive any form or rebate or concession (funding concession/currency conversion concession).

Then, on Monday, July 30th, retail clients will face new automatic close out rules.

The Automatic COM, the broker explains, is close out monitor (COM) if traders have insufficient funds to cover the open trades in their account. Retail clients will be subject to different COM ratio/available to deal calculations that will vary depending on what region a trader is in.

Traders who have questions about the changes are encouraged to comment on the IG Community forum.

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