The CySEC abandons its risk-based approach to CFD leverage ceilings

The Cyprus Securities and Exchange Commission (CySEC) has presented its national measures to restrict the marketing, distribution and sale of Contracts for Difference (CFDs), the document reveals that the Cypriot regulator has abandoned the risk-based approach to leverage caps for CFDs.

For the record, the CySEC proposed to introduce more stringent leverage limits for individual traders in the gray area of ​​the target market and slightly higher for traders in the higher end of the target market. In simple terms, various leverage ceilings would have been applied to various categories of traders. But CySEC has abandoned this plan.

The CySEC has received comments from 14 investment firms, an industry association, a Competent National Authority from another Member State and a private investor. The private investor asked CySEC to reconsider its approach and to refrain from introducing measures affecting leverage. The Competent National Authority expressed concern over the proposed divergence from ESMA's CP-02-2019 measures, particularly with respect to whether this divergence will create confusion among Canadian residents who are wondering whether the content of the restrictions will apply to them.

With regard to the Competent National Authority's position, the CySEC shares concerns about the cross-border application of the measures and the confusion that could be created by the adoption of different measures in the European Union by the Competent National Authorities.

As a result, the national Cypriot intervention measures provide for the adoption of the same leverage limits for all individual traders:

    30: 1 for major currency pairs;
    20: 1 for non-major currency pairs, gold and major indices;
    10: 1 for commodities other than gold and non-major stock indices;
    5: 1 for individual stocks and other reference values;
    2: 1 for cryptos.

The CySEC will also adopt the ESMA's risk warning.