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When will Crypto be able to be traded by all accounts?


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It would be highly unusual for the FCA to do a U-turn. They think they are "protecting" the little guy from the sharks, but this leads them to do ridiculous things e.g. with option margin whereby a retail investor gets charged the full futures margin on a short option position irrespective of how far out of the money it is and, even worse, gets charged the same margin again even on an opposite position which could not possibly lose at expiration if the first leg were losing.

For example a roughly at-the-money Put  sells for a premium of P and is margined at an initial M (plus there is daily variation margin if the trade goes in the wrong direction) . A conservative trader thinks the market is slowly grinding down and wants to sell a Put 10% below the market for a much smaller premium p, but is still margined for the full amount M, so his ROI is considerably less - this tempts him to take the arguably riskier position of selling the higher premium position instead. 

However, being a conservative trader he decides to play it safe by selling the out of the money put anyway, not minding if he ends up having to buy the underlying at the lower price,  but he then figures to  increase his potential return by also selling a 10% out-of-the-money call. He would normally not expect to have to fully margin both sides of the trade as it would be impossible to lose money on both legs at expiry and volatility would have to increase drastically for the premiums to rise enough on both legs to force him to close early in addition to posting variation margin on any daily losses. Yet he is dumb-founded to find that FCA rules require  the full margin amount M on BOTH legs. Not only can he not double his ROI but if he gets a margin call on his account he may have to close positions at a loss due to the extra margin M, on the second option position not being available as margin for other positions that he would have  preferred to keep open during some short-term turbulence..Thus the FCA can actually cause the retail punter in this scenario to lose money on a position that he would otherwise have likely profited from.

To avoid being treated as stupid (cos you don't happen to have half a million quid on top of your years of amateur trading experience)  many customers may inevitably end up trading with unregulated overseas brokers which isn't at all in any way even riskier for them now is it?

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  • 3 months later...

FCA rules to ban crypto products are dumb. I used to have a Bitcoin ETN in my SIPP which was affected by the ban, meaning I could no longer buy the product anymore, only sell it. I sold it recently with a heavy heart knowing under the current rules I could not buy it again.

With the proceeds I bought a range of Bitcoin mining stocks like Argo Blockchain, Hut8 and Mara which act as a leveraged play on Bitcoin price (like all commodity miners do versus the underlying commodity). These miners carry greater operational risk than holding Bitcoin itself and the share price is much more volatile too. So instead of protecting me, all the FCA has done is forced me to take greater risk elsewhere.

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What is the FCA ban?

The FCA announced a ban, affecting UK retail traders, on trading cryptocurrencies through derivatives like spread bets and CFDs. The ban began on 6 January 2021. You can find more information on the FCA’s website here.

This means that, if you’re contracting with our UK office, you’ll only be able to trade cryptocurrencies through CFDs and spread bets if you’re classified as a professional trader. Learn more about professional trading and check your eligibility on our professional account page.


All the best - MongiIG

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