You are not logged in.

#1 06-06-2019 13:50:03

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3068

CySEC suggests 3 levels of leverage

CySEC suggests 3 levels of leverage
As ESMA's deadline is the end of next month for European brokers to comply with their strict new rules, national regulatory agencies are scrambling to impose their own specific rules. Last week Cyprus' CySEC released its own announcement on the subject.

Rather than just copy-paste ESMA's rules, the Cyprus regulator is doing something else: suggesting leverage levels that are related to levels of risk. Each investor will fall into one of three leverage categories depending on his or her trading background. 

Leverage according to a risk

This method will instead be linked to a trader's trading experience and aversion to risk. It will be up to each brokerage to assign traders to the right category of risk.

Also, some traders will be between the two outlier categories, a sort of grey zone. For these investors, leverage will be far lower than those of the others.

Traders in this grey area would only be entitled to a maximum leverage of 20 to 1 on the main forex currencies and none whatsoever for cryptocurrencies. 

However, the Cyprus-based regulator encourages less leverage restrictions for the more experienced traders, while those with a more average profile will benefit from the leverage imposed by the ESMA restrictions.

For a trader to fall into the top classification, he or she must earn at least 39,999 a year or have net assets of at least 199,999.

Traders that fall in the upper category are eligible for 50 to 1 leverage for forex assets and 30 to 1 for major indexes.

These suggested levels were calculated according to asset volatility and the background, experience and total assets of traders.   

"Spliting traders into the different segments (a majority of clients will be in the lower-leverage segment) of course necessitates that each brokerage examine each of its traders on a case by base basis" says the Cyprus regulator.

Some things won't change

Beyond the new leverage scheme, each trader will now benefit from negative account protection and their trades will immediately be closed once their available capital only covers half the obligatory margin to keep the trades open.

However, questionable marketing tactics will remain illegal. Across-the-board warning messages are to remain in place no matter what and brokers will have to indicate the proportion of traders that lose their capital when trading with that brokerage.

Protecting clients

The regulator's chief officer, Dmitri Cologero says that the rules governing Cyprus-based brokers are much stricter than they were before.

"ESMA's community-wide rules complement Cyprus' own rules aimed at protecting traders interests."

"Anything worth having is worth going for - all the way." - J.R. Ewing



Board footer