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In January, ESMA proposed a number of changes for leveraged retail traders within the EU region and kicked off a consultation period to open up the discussion. Over 14,600 people had their say via the #ReplyToESMA website, with an overwhelming majority opposing the regulatory changes.
On the back of the proposal and trader feedback, ESMA drew up new regulations which are set to go live on August 1. To comply with these new regulations you may notice some changes on your IG account from the week commencing Monday July 23, 2018. Although not all the regulatory changes will affect all clients (for example some regulatory changes only affect specific instruments or account types), you can find a roadmap for these changes below.
Wednesday, July 25
Collateral - Linked collateral accounts were available for clients who had both a leveraged trading account (CFD or spread bet) and a stockbroking account. As of Wednesday, July 25 linked collateral accounts will no longer be an option. If you have insufficient funds at this time your leveraged trading account will be at risk of position closures.
Thursday, July 26
Credit limits for retail clients (formerly known as ‘Select Accounts’) - Some clients used to have ‘Select Accounts’, which allowed for certain types of credit limits or margin rates. On Thursday these account types will be switched to ‘closing only’ (i.e. the account type and agreed terms will remain, but you can only close your positions at your convenience and no new positions can be opened under this account type). Any new position would need to be opened under a newly set up, regular IG retail account.
Friday, July 27
CFD options - At 15:00 (3pm) UK time all UK and European retail CFD clients will have any open options position closed basis the IG mid-price and all option marks will be set for ‘professional only’.
IG has recently taken a business decision to no longer be supporting options trading for CFD accounts contracted through our European offices. While we appreciate that this decision will cause frustration to those who enjoy the product, regrettably, options have become a market that no longer fits with IG’s European offering. We are currently looking into alternative products to offer to meet a similar requirement and further information will be published when available.
Closing at the mid-price means that IG will also not be charging any dealing costs to close your positions which remain open at 3pm UK time on 27th June. If you have access to a Spread Betting account (UK clients only), we will also be happy to “bed and breakfast” your trade across at the relevant, current prices, so please let us know if that is something you wish for us to do. This will need to be done over the phone as it would constitute a deal, so please give one of our trading services members a call at a time convenient, but before the above cut off date and time.
If you have a Spread Betting account, only available to UK residents, then you can continue to speculate with options. If you are a UK resident but don’t have a spread betting account you can add one in My IG by clicking on My IG > Dashboard > Add an account.
Saturday, July 28
A number of changes will be applied over the weekend
Margin Changes - Margin requirements to open and maintain leveraged positions was one of the more prominent aspects of the ESMA regulations. On the Saturday, July 28 new margin floors will be implemented across all ESMA retail accounts for all new positions. Existing positions will keep current margin rates. You can find more information regarding retail margin requirements here.
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, clients will have to pay 100% of the ESMA margin on each position. This change will only apply on new positions, therefore if you are currently long and short the same market then you will continue to receive the concession.
Rollovers - When Retail clients futures contracts rollover and a position is opened after the July 28, then the new position will be margined basis the ESMA minimums.
Concessions - Some retail clients may receive concessions based on trade activity. ESMA regulations mean that retail clients will no longer receive any form or rebate or concession (funding concession/currency conversion concession).
Monday, July 30
Automatic COM (close out monitor if you have insufficient funds to cover the open trades in your account) - Retail clients will be subject to different COM ratio/available to deal calculations that will vary depending on what region you are in. You can read an overview of the ESMA margin rules from July 30th here.
If you have any queries or questions regarding the new ESMA regulations please add a comment below. You may also find the following links useful.
Once again, please remember that these changes only affect retail clients of EU firms (that are subject to ESMA regulation), and do not apply to professional clients. Please add any query, question, or request for clarification below.