What do you think of the new ESMA proposals?

[phillo]

would be useful if IG could reduce their minimum position sizes   or introduce more options - particularly on shares

[Guest 202925]

Good idea- IG can you reduce the best sizes on shares and commodities to 10p a point?

 

 

[JamesIG]

Hi all. There have been a few more questions regarding ESMA so I wanted to take the time to address some of those now. As before, please do not take the following as an official statement from IG, but rather read it in the medium in which it is presented – a forum reply to your questions.

 

 

On what happens next…

As previously stated by a Community member, an official ESMA press release ‘next steps’ stated that: “ESMA intends to adopt these measures in the official languages of the EU in the coming weeks, following which ESMA will publish an official notice on its website.  The measures will then be published in the Official Journal of the EU (OJ) and will start to apply one month, for binary options, and two months, for CFDs, after their publication in the OJ.”

 

The main take away from this is that we have some time before these measures come into force. An email communication from IG was sent to the full client base on the 29th of March stating that we expect this to be July, but please let me know if you haven’t seen this and I can get it sent out again.

 

I would like to reiterate that at present exact date is unknown, and IG may make the decision to make any changes earlier than required. This will of course be communicated to clients.

 

Finally, I also wanted to note one Community member’s question about the future financial stability of the IG Group in light of these regulatory changes. As we set out in our RNS issued last week, we expect these new rules to have some impact on our revenue, but we expect to remain the strongest and most stable CFD provider in the World.

 

 

On the impact on new or old positions…

In the above ESMA link under the ‘CFDs – agreed measures, section one’ they note that “Leverage limits on the opening of a position by a retail client from…” which we take to mean this will only have an effect on the opening of new positions. This therefore shouldn’t impact existing trades, however we are looking to confirm this.

 

 

In regards to the ‘three month’ query…

A couple of posts in this thread have noted a slight confusion over the length of time these measures will be imposed. The press release stated that “In accordance with MiFIR, ESMA can only introduce temporary intervention measures on a three monthly basis. Before the end of the three months, ESMA will consider the need to extend the intervention measures for a further three months.” We don’t know for sure, but we think ESMA will extend the time period for these rules at least a couple of times before national regulators like the FCA update their own rules to be more like ESMA’s new rules.

 

 

On what IG is doing in regards to the ESMA ruling…

When the ESMA ruling first came out we issued an RNS response which may be worth a read if you haven’t already. As a global leader in online trading for CFD and Spread Betting clients we have considerable resources at our disposal which we can prioritise to matters such as this. We have a good relationship with the regulators and will continue talks with the bodies we are regulated by, both going into and after the ESMA follow up over the coming months.

 

We are reviewing all available options to see what course of action is the most appropriate for our client base, and although I do appreciate the ESMA regulation could have a significant impact and you would like an answer as soon as possible, we want to make sure that all points are covered before a decision is made. It’s also worth noting that the ESMA statement above was a press release, and there will be additional documentation and granular details which as a business we will have to work through and adhere to.

 

The most important thing to note from a client relationship perspective is that all communications we have with you are accurate and informative, and whilst we will aim to communicate any changes as quickly as possible, we need to make sure they are compliant and suitable.

 

 

Switzerland or Australia?

Because I work for IG in London I can’t speak directly for our Swiss Bank or our Australian business. Although we obviously work under the IG brand, there are a couple of unique aspects to their processes that will be different to the UK (for example, they only offer CFDs). My understanding is that both businesses accept clients from outside Switzerland and Australia respectively. If you have queries about opening an account with these businesses, could I suggest you call them directly? Here is a link to our global website if you want to find out more.

 

 

A final note

IG Community was set up as an open and transparent forum for our clients to discuss market movements and trade ideas, submit questions and assist in any self-help you may require, as well as showcase new products and offerings from IG. Whilst we will continue to maintain that, we do have a set of guidelines in place which a couple of the above posts have broken. This specifically relates to the promotion of other providers.

 

Open discussion is important, and whilst I know the longer term Community users will agree that we generally don’t edit posts, I have had to go through and make a few amendments. In the context of this thread these posts also hint at circumnavigating a regulatory change, which when it comes into effect will legally require adherence. Can I therefore ask Community members to hold off on discussing these matters.

[Guest Sn]

We could do with a non-IG forum to discuss these margins changes and our future options. It seriously affects the ability of many to continue their profitable trading. Any suggestions on other forums/means of discussion? Trade2win?

[Guest PandaFace]

All they’re saying is don’t talk about companies which explicitly talk about getting around the law... seems fair.

[Guest Sn]

Yes Pandaface, and don't talk about competitors, which is completely fair.

 

The point i was making was i think there'd be a benefit of us all discussing our options where we don't have such restrictions.

[Guest straddle]

JAMES

You write "we think ESMA will extend the time period for these rules at least a couple of times before national regulators like the FCA update their own rules to be more like ESMA’s new rules."

Will IG impose the new rules when  ESMA decides or when the FCA follows, which, according to the above, could be 6 months later? 

[Kodiak]

"The temporary measures are to be reviewed by ESMA after three months to assess their impact. However, the FCA has already indicated that these measures may be permanently cemented into legislation in the UK at a later date."

 

https://www.reedsmith.com/en/perspectives/2018/04/esma-to-impose-restrictions-on-cfds-product-intervention-measures

[Kodiak]

from the link above

 

"This is known as the ‘qualitative test’ and is a subjective requirement. The client would also need to meet a ‘quantitative test’ by passing objective qualifications in order to be classified as an ‘elective professional’ "

 

subjective?

 

 

[JamesIG]

---

wrote:

JAMES

You write "we think ESMA will extend the time period for these rules at least a couple of times before national regulators like the FCA update their own rules to be more like ESMA’s new rules." Will IG impose the new rules when  ESMA decides or when the FCA follows, which, according to the above, could be 6 months later? 

---

As a speculative, non legal reply >>> Rules imposed by ESMA would require adherence. It wouldn't matter that the FCA could then take an additional 6 months (for arguments sake) to impose the same standard of ruling on a most domestic level.

 

Also note that we may apply rulings prior to this hard cut off date. We will make sure all clients are aware of this as soon as we have a firmer understanding which should be over the next few weeks as more details comes from ESMA.

[coolebenji]

 

Hello James, why would you be applying ruling changes prior to the hard cut off date when there has been such an over whelming response of rejection by your customers and the ig community?

[JamesIG]

hey  - We have 185,000 clients trading millions of positions over 15,000 different markets, and there are plans (as you know) for significant changes in margin which in some cases can be up to 10x the current requirement. The best way to transition into changes as significant as these is gradually, not only from a market and credit risk management perspective, but also simple practicality. With a hard start day proposed it would be a poor business decision to leave it to the very last moment before making all these changes. 

[coolebenji]

...just when l was getting my game together!  oh well as Jesse Livermore says:

 

"There is nothing new on Wall Street or in stock speculation. What has happened in the past will happen again, and again, and again. This is because human nature does not change, and it is human emotion, solidly build into human nature, that always gets in the way of human intelligence. Of this I am sure."

 

l feel l have seen it all before, 100 years before, there has always been leverage and there always will be... l am looking forward to the European Bureaucrats to push off now...  

 

if you google why ,'why businesses fail' Fobes claim 8 out 10 businesses fail in their first 18 months, and google 'how many businesses survive after 10 years' then inc claims 96% fail... it seems the bureaucrats don't live in the real world with their college education and there cosy jobs... how many domestic industries can the European's wreck...

 

...note to self, l really shouldn't have an opinion...

 

 

[Gaffi1]

FWIW  i'm thinking a visit to Morocco might help, and trade via VPS through there.  I've probably got it all wrong.  oh well  .  .  .

[Kodiak]

any news about the changes?

 

i saw ETX will start with the margin close out rule by the end of may

[247trader]

Nothing yet I’m afraid but it would be good to get something sorted on Monday

[Guest RichB-Trader]

Hello, I have done a little reading on this. I was originally, to dip my toe, risk about £3000 at around 2-3% per trade of that initial capital. Now am I correct in saying I can still risk the same monetary value (2-3% of £3000) but I will need more cash in my IG account? Therefor it will only cause a cash flow issue?

[JamesIG]

Hey - to confirm we will have 2 months from the official publication of the regulation (as currently it was only a notification of intent to change) and therefore we don't have a planned roll out for this. We are of course making provision and planning on the back end, but until we have an official statement and clear set of dates, we will be holding off. 

 

Please also note we now have a page on IG.com which may be of interest for some people https://www.ig.com/uk/professional-trading

[Guest MakJagger]

Well if you ask me the new ESMA proposals suck, only a few rich old timers probably favour it but for the majority of punters it's ridiculous.

 

The only thing which ESMA should have imposed is the negative balance protection as standard, this would have been more than enough to protect the retail traders but instead they're pushing the average Joe out of the game.

 

 

[Guest Ritetrader]

The regulators are using a hammer to crack a nut as usual. The new rules have little relevance, it is effectively a ban on trading similar in the US, stopping traders will small accounts from trading. Everyone has to start somewhere.  The answer as someone has already mentioned, balance protection would have been the answer. 

 

Instead of targeting scam companies, they are targeting regulated brokers. The scammers will still be taking money off people despite their new rules!!

 

 

 

[Guest straddle]

ESMA has fired the starting gun, new rules from August 1st

[phillo]

I've looked at the Official website & see it talks about binary options & CFDs. I assume , whilst its not mentioned, it covers spreadbetting as well   :    https://www.esma.europa.eu/sites/default/files/library/esma71-99-973_press_release_product_intervention_euoj_publication.pdf

[spiderman]

What does the 3 month thing mean? They say at the end of the 3 month they will look to extend for a further 3 month. I thought it is a permanent change.

[Kodiak]

Maybe IG should open up a new thread to answer questions about the new rules?

 

i suppose for example that open up a hedge needs double initial margin? and what happens after, still double?

 

say you do automated trading with metatrader or prorealtime and have multiple strategies that are long and short at the same time in the same market

[Guest PandaFace]

It’s a forum.

You can always open that new thread

[JamesIG]

---

 wrote:

What does the 3 month thing mean? They say at the end of the 3 month they will look to extend for a further 3 month. I thought it is a permanent change.

---

the ESMA documentation states "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". After this time they have the power to roll over again for a further three months, and can continue to roll. There is an expectation this will happen, but also please remember that there are some significant similarities between the FCA paper as well, so it's unlikely that at the end of the roll period local regulators haven't adopted the same (or very similar) stance. 

[Guest 202925]

I read it too and didn't see it Elle. Britain is leaving the EU, so why does this apply?

 

I got the email from IG this Morning advising of the margin increases. I found it disappointing that they didn't drop the Bet sizes to at least try and keep their clients. Applying for the professional status has also been a complete shambles and a waste of time and is clearly geared towards 500k+ plus clients.

 

 

[Caseynotes]

 & ,  yes spreadbetting comes under CFD and is not mentioned by name as it is a UK only function.

 

As James points out the FCA are likely to adopt the EU regulation in it's entirety in order to keep in step so being in or out of the EU won't make any difference.

 

IG having mini lot sizes for the CFD and MT4 platforms but not the spreadbetting platform does seem to lack consistency especially considering such a major shift in the margin rate.

[spiderman]

So am I correct in saying that the new spreadbetting rules don't happen until early August. And it is July for binaries?

[Caseynotes]

Yes, for clients of brokers in the UK and EU.