Professional qualifications & margins

[ChrisMahoola]

Hi, I've seen a warning pop up about the proposed new margin requirements.  One of the conditions is that you've received some professional training.  My question is, what would be the minimum required for this and how much would the course be especially for self training.  I could think of it as an interesting opportunity!

 

Thanks, Chris

[Kodiak]

But if no retail taking the other side of the pro

 

IG need to hedge more in the real markets and thats more expensive?

[Kodiak]

I dont like these new regulations either but i try to be positive (half full glass)

 

its like trading, you need to adapt to changes in the markets

[Guest MakJagger]

The hike from 0.5% to 5% meaning 10 times the amount of deposit factor on the indices (i.e for £10 a point on the DOW - you'll need a deposit of £12000) - currently you'll only need £1200...

 

I suppose it isn't too bad, I was concerned the hike would be 20 or 30% and if that was the case - I would have probably closed my IG account and packed in trading. The negative protection balance is also good news - I think this should have been the standard with all the providers regardless of the new changes.

 

Oh well, I guess I better grind on and try to make £500,000 so I can get to be a "professional IG" client

 

Happy easter & all the best!

[ChrisMahoola]

Is anyone else thinking this is a way of getting rid of the retail traders? Most people I know start off with a grand - assuming the worst - but this is would be useless!

[Guest PandaFace]

Why would anyone want to do that ?

 

I think it’s with their best intentions... but I just think the regulation and execution of how to actually protect people is off. At the end of the day people will just move to completely unregulated companies.

[Crush1884]

I’ve traded for a reasonable period now with a high leverage against the deposits I hold. I have had moderate success. I understand the risk that comes with my trading and accept that irreversible losses (although unlikely) are possible. With this in mind I will no longer be able to trade in the manner I would like. Thus I am going to be forced to look for non EU spread betting companies that do not have to comply with these restrictions.

 

It appears IG will suffer as people who employ an arbitrage style trading like I do will no longer be able to work under these constraints. I understand why the restrictions have been brought into place but it seems it’s to protect the buffoons against themselves. Alongside this they will Restrict the thoughtful, strategic high frequency/arbitrage trader and drive business away from EU domiciled trading firms.

 

I would love to stay with IG and I’m sure they would love to keep my business as my style provides a heck of a lot of commissions for the company. However it seems unlikely once these restrictions come into play in July

[Guest MakJagger]

Well there's not many outside the EU that provide CFD and spreadbetting I'm afraid, it's banned in the USA (not sure about Canada) and you'll have a pretty hard time finding a replacement company (I looked before)

 

@ChrisMahoola With a grand, yes it'll be pretty much useless, I mean personally I wouldn't go through all the stress and time of trading, scouring through charts and economic data/news for the sake of 50p a point....so the ESMA move will no doubt get rid of the "newbie novices" who are just about making ends meet with a normal day job..

 

All in all - it's not good for the average poorer punter (who probably does £5pp on a small pot), IMO they've just turned it into a rich mans club

[rimmy2000]

I'd far rather accept the regs and keep my money in a regulated and reputable UK listed business than some shady foreign outfit, but each to their own. 

 

Storm. Teacup.

[Tudor2]

Fantastic firms elsewhere i,e Australasia - retail investors well looked after.

[Kodiak]

UK is the only place to trade taxfree spreadbetting?

 

But others that trade CFDs can probably find something outside EU like Switzerland? or Austrailia?

 

Maybe IG can help those that want to move from "ESMA" to another country and still use IG

[Caseynotes]

There could well be other knock on effects. It seems likely ESMA will chase not only those just starting out with a small account straight into the laps of the unregulated offshore firms but also many with experience who are trying to build up their account, the decision looks short sighted and damaging to small retail and brokers alike.

 

Obviously brokers are now going to concentrate on their higher end clients, not only to make sure they keep those they already have but to try to poach from other firms and I wonder how that might impact the small retail trader. The negative account protection will increase costs but will apply only to retail not 'professionals'.

 

So small retail will be generating less revenue and higher costs at a time when IG need a plan to lure high end 'professionals'. I wonder what/who will be sacrificed?

For instance will they be lowering the SB minimum bet size, come July the current minimum in many markets will be higher than a maximum bet size on a small account. Or just introduce a new higher account minimum.

 

This ESMA decision will generate more change yet as it must cause a rethink of IG's business model.

[Guest PandaFace]

I do think there are some people who guenuinly do not understand the risks they are taking, and that is what these regulations are looking to control. They don’t understand, however, based entirely on their own back. There is SO much educational material, prompts, webpages, videos, guides and pdfs, webinars and seminars provided by IG, LET ALONE the millions of webpages and YouTube videos to educate. The issue is most people just don’t care and won’t be arsed to do that.

 

That independent article. Just a side note. He knew EXACTLY what he was doing. He knew his risks. He knew his reward. He decided to pick up pennies with his teeth in front of the steamroller... This regulation will protect people like him as well I guess.

 

But what about the people who trade a lot? Those who understand the markets and know the risks they’re taking out? Why the need for the mommy coddling? Surely those who want the leverage will just up sticks and sign in to MaxLeverageAvaliable.ch (my brand new made up Swiss hosted webpage which gives you 100000x leverage) rather than the ESMA regulates countries.

 

I don’t like the protectionist stance of this ruling.

[Guest london]

these new measure are very unfortunate for traders as they limit opportunities 

 

these new measure are very unfortunate for IG as they will make less profit

 

unfortunately these measure came around due to the nature of the business that IG and other ran 

 

effectively a ponzi scheme where they do everything to churn and burn customers and get new ones to keep they business going 

 

we are now even getting ads on tv with a company promoting that they put all orders into the market ! implying they know that other companies try to get customers to lose .. 

 

ig asking for help from customers .. is like a fox asking the chickens to tell the farmer the fox is ok .. 

[Crush1884]

Anyone know of spreadbetting providers from Canada or Australia (where it is legal)?

 

I ultimately will need to make a decision between regulation and safety of deposits over maximising the return from my strategy.

 

Quickly searched for non EU domiciled spreadbetting companies but I'm struggling to find one. Seems like it could be a gold mine for someone to set up a non EU domiciled spreadbetting company that is regulated and run in a non pirate way!

[spidervish]

James, the FCA handbook rule say point 1 and 3 required... But IG are only using Point 2 for ascertaining qualification.. How come?

[JamesIG]

---

 wrote:

James, the FCA handbook rule say point 1 and 3 required... But IG are only using Point 2 for ascertaining qualification.. How come?

---

Hey  - we comply with all points, however they are done at different times so it may not be as obvious. For example part 1 is completed on sign up, and if insufficient understanding of the financial markets comes across then we will perform additional appropriateness. Part 2 will be checked when a client specifically wants to upgrade, as is part 3. 

[Guest geldrausch]

There are a few points that in my opinion illustrate that all these decisions are done by people that have not used a CFD/Spreadbetting account themselves.

1st

500k to determine if someone is professional is a great measure, clearly someone with 450k has no clue about what he/she is doing

 

2nd

Now an account cannot lose more than deposited.
If those that wanted to not have any risk of losing more than deposited, they could have used garanteed stops.

For the extreme risk taker that amounts to:
Now your account is protected from losing more that you deposited, but you now are forced to lose 10x the amount than you ever wanted to risk, due to the fact that you now need 12k margin, where before you needed 1.2k. In case of a flashcrash worst case szenario you now lose the 12k not only the 1.2k.

 

There are a lot of CFD companies out there that are small and in countries like Cyprus where legislation and supervision is not the standart it might be in th UK or Germany.
Those companies force customers (which want to keep the same trading style and can afford it) do deposit huge amounts of money to their accounts.
I hope that the ESMA makes sure that all those funds are protected if/when one of those companies goes belly up.

 

Apart from that a 1200 Euro deposit turning into a 12000 Euro deposit due to increased margin might not be a problem by the amount of money itself, I would have prefered to keep the additional 10800 Euro in a long term stock market ETF earning money than at a CFD account where the only thing it does is giving a unpaid loan to the CFD broker.

How that is protecting me as a customer, I have still not figured out.

 

With the requested margin I guess a move to the futures markets directly makes more sense.
But maybe IG figures something out.

 

 

[Guest Dylan007]

It says 500k in stocks cash etc. What if the original 500k you have invested is currently below that due to open trades which are in a loss?

Would this classify as having 500k or does the overall balance with open trades need to be 500k or above?

[Tudor2]

Retail customers leaving IG in huge numbers...no surprise there !

[Guest majco]

On 1/22/2018 at 12:12 PM, db said:

Hi , as regards point number 1 in the screenshot posted above, with reference to having traded 10 times in each of the previous 4 quarters, what is the definition of 'significant size' in this case?

 

Thanks

You have to have traded 10 times with a minimum lot size of 0.50 lots per trade

[Guest DaVinci]

On 4/16/2018 at 8:53 AM, JamesIG said:

 

---

 wrote:

 

 

James, the FCA handbook rule say point 1 and 3 required... But IG are only using Point 2 for ascertaining qualification.. How come?

---

 

Hey  - we comply with all points, however they are done at different times so it may not be as obvious. For example part 1 is completed on sign up, and if insufficient understanding of the financial markets comes across then we will perform additional appropriateness. Part 2 will be checked when a client specifically wants to upgrade, as is part 3. 

@JamesIG if I understand correctly by your comment, point 1 (relevant knowledge and work experience) is only checked on signup, but I have just been on the phone with your support team and they said it does get checked during the application for pro status for existing clients. So what is the correct interpretation? 

Also, I have enough trading volume and I worked for more than 2 years as a developer for a large hedge fund in UK, in very close collaboration with traders, creating applications for trading execution and portfolio management that absolutely require financial knowledge of complex instruments, yet, had my application rejected on the grounds that "I was not a trader" as I was told on the phone when I called to find out why. This happened even though the FCA handbook clearly states a requirement for "financial knowledge" and it does not make any mention of "must be a trader".

So I am about to close my IG account which I've held for a few years now, and BTW I already am accepted as pro client in a few other respected spread betting companies in UK, so you might want to revisit the way you assess applications and make sure that team knows their job and the way to interpret FCA regulations. 

Shame cause I like IG, but hey, this is life, all the best to everybody reading this.

[JamesIG]

Hi @DaVinci - yes, when you first sign up for an IG account you'll undergo appropriateness as described above. When you are looking at changing your account type, for example to a Professional account (the requirements of which have only been published in these last few months), then you may be asked to validate some information again. There could be months or years between signing up for an IG account originally and looking to change to this new ESMA professional status, hence further checks.

I also understand your point regarding working in the financial services industry on the developer side. As you stated there is a requirement to abide by the terms laid out by the regulators, however in many instances this is subjective. For example as found here (https://www.handbook.fca.org.uk/handbook/COBS/3/5.html - also below) you will notice point (1) puts the ownus on IG and contains subjectivity in the phrasing. Our legal and compliance team have drawn up a framework regarding this to see who should and shouldn't be rejected. In this instance basis your statement I will tag your original request with our compliance team for review to get a second opinion. 

Finally due to the subjective nature of the framework as laid out by the FCA I wouldn't be able to comment on other firms choices. The decision and framework we have come up with is what we believe to be right all things considered. 

[Guest PandaFace]

I believe it could be anytime from this week forwards right? I read that somewhere...

[JamesIG]

Hi 

 

The retail to professional classification give the following benefits, and requires the following criteria. There is a note of working in the financial services (point three) but nothing relating to training specifically. Are you referring to the work in financial services part? If you could maybe post a screenshot or further info then I'd be able to help further. 

 

[Guest london]

in reality no tangible benefits for customers

 

and IG gets let of the hook .. re acting in customers best interest

 

once again everything aimed at benefiting IG

[db]

Hi , as regards point number 1 in the screenshot posted above, with reference to having traded 10 times in each of the previous 4 quarters, what is the definition of 'significant size' in this case?

 

Thanks

[rimmy2000]

Professional qualifications in my eye would be CFA accreditation or even qualified accountant, perhaps.

[Caseynotes]

I would view the conditions set in light of events such as the SNB change in policy that caused the EURCHF crash in 2015. Not only did many retail traders lose but several small brokers when bust as well. Traders were using maximum leverage to make profit on a small points move knowing the SNB you act to restore price. A teacher on a £18,000 salary found himself over £200,000 in debt to IG who had to write it off. If memory serves IG lost over £30 million due to these write offs.

 

The spilt between professional and retail is an ESMA policy just as is the proposed increase in margin overall. So to trade with higher leverage than retail the broker is required now to ensure that you really do know what you are doing eg. by having worked in the industry or have the funds to cover extreme events that retail is prone to walk straight into.

 

It would be interesting to know if IG’s criteria mirrors that of other brokers or if they all have some degree freedom to set their own criteria.

 

 

 

https://www.esma.europa.eu/sites/default/files/library/esma35-43-620_report_on_guidelines_on_product_governance.pdf

 

see pages 34 and 35 for notes following the headings listed below.

 

18. Manufacturers should use the following list of five categories:

(a) The type of clients to whom the product is targeted: The firm should specify to which type of client the product is targeted. This specification should be made according to the MiFID II client categorisation of “retail client”, “professional client” and/or “eligible counterparty”.

(b) Knowledge and experience:

© Financial situation with a focus on the ability to bear losses:

(d) Risk tolerance and compatibility of the risk/reward profile of the product with the target market:

(e) Clients’ Objectives and Needs:

 

[JamesIG]

Hi  - these specifics are actually requested by the governing body themselves. You can see the exact phrasing on this via this link: FCA Handbook and then scrolling to the section which is titled "Elective professional clients". I have included a screenshot below for convenience. 

 

[JamesIG]

Absolutely  - this is a direct request from the regulators. You can see a number of our replies to these changes in regulation here http://www.iggroup.com/press/latest-news but you may need to click on '2017' and scroll a little to see the relevant posts as these proposals came out last year. 

 

We will try and make sure that clients fill in the requirements appropriately, however this will be internally monitored.