New ESMA Rquirements

Kindly note that as requested by the ESMA (The EUROPEAN SECURITIES AND MARKETS AUTHORITY) decision 2018/796 of 22 May 2018, by way of a product intervention measure ESMA has adopted under Article 40 of the Markets in Financial Instruments Regulation, as from the 1st August 2018 all Forex businesses that offer CFD trading to retail clients are to adopt a number of temporary measures to any retail clients trading in CFDs. These temporary measures shall apply for a period of three months but ESMA may choose to extend them for a further three month period, in which case we will inform you by separate communication if and when ESMA takes such a decision. The temporary measures that will apply as from the 1st August 2018 on trading of CFDs are the following:

  1. Leverage limits on the opening of a position by a retail client shall vary from 30:1 to 2:1, according to the volatility of the underlying:

    • 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 equity indices;
    • 5:1 for individual equities and other reference values;
    • 2:1 for cryptocurrencies;
  2. A margin close out rule on a per account basis shall apply. This will standardise the percentage of margin (at 50% of the total initial margin protection) at which NSFX Limited is required to close out one or more retail client’s open CFDs. This rule should provide for close-out of one or more CFDs on favourable terms to the retail client to ensure that the value of the account does not fall lower than 50 % of the total initial margin protection that was paid to enter into all currently open CFDs at any point in time.The value of the account for these purposes should be determined by the funds in that account together with any unrealised net profits from open CFDs connected to that account;
  3. A negative balance protection on a per account basis shall apply. This will provide an overall guaranteed limit on retail client losses. The purpose of the negative balance protection is to ensure that a client’s maximum losses from trading CFDs, including all related costs, are limited to the total funds related to trading CFDs that are in the client’s CFD trading account. This includes any funds yet to be paid into that account due to net profits from the closure of open CFDs connected to that account. Other accounts not connected to CFDs will not be considered as client capital at risk. In case a trading account also includes other financial instruments (for example, UCITS or shares), only the funds explicitly dedicated to CFD trading, and not those dedicated to other financial instruments, will be at risk;
  4. A restriction shall be introduced on the incentives offered to trade CFDs. Monetary (for example so called ‘trading bonuses’) and certain types of non-monetary benefits shall be banned as they could distract retail clients from the high-risk nature of CFD products;
  5. A standardized risk warning, including information on the percentage of losses on NSFX’s retail investor accounts, shall be available to all existing and new clients on the NSFX websites.