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The ESMA and Its New Regulations

Recently, many traders have asked about the new policies of ESMA and the implications that they will carry towards their trading accounts. This article will clarify about what these new regulations will be and how accounts that belong to brokers operating will be affected by the EU. To start it is important to clarify that ESMA is, the European Securities and Markets Authority. This agency is responsible for ensuring the functionality and transparency of securities markets in the old continent.

The changes will be implemented on August 1 of this year with regard to regulations and limits for retail investors and brokers. These changes will impact within the European markets which will be a major boon for the largest equity market on the planet, Forex.

“These traders lose their capital due to their lack of knowledge of the Forex market”

When we analyze the changes that have been created, there is an evident leaning towards protecting the smaller investors. These traders lose their capital due to their lack of knowledge of the Forex market, often being victims of deceptive advertising and promises of unrealistic returns. These measures are directed towards you and the protection of your assets.

The new measures do not apply to professional clients, that is, those who demonstrate:

  • Have carried out at least 10 operations with a value of at least € 20,000 in the last quarter.
  • Have an equity equal to or greater than € 500,000
  • Have a position as a professional in the financial sector with at least one year of seniority.

Although on July 1, the ban on binary options began to apply to retail investors; it is actually a month later, when the bulk of CFD trading modifications will come into effect.

The limits to the leverage that the broker can offer will remain as follows: The limits to the leverage that the broker can offer will remain as follows:

  • 30: 1 for the main currency pairs.
  • 20: 1 for gold, main indices and non-core currency pairs.10: 1 for less important indices and Commodities other than gold.
  • 5: 1 for individual actions
  • 2: 1 for cryptocurrencies.

Other measures of the new regulation are the following:

The closing of transactions by account margin obliges the broker to close the CFD positions opened by the client, when the margin of their guarantees is 50% or lower, considerably reducing the margin of maneuver of the investor.

  • The protection against negative balance, which prevents an investor from losing more money than he deposited in his account.
  • The restriction to the incentive5s to operate with CFDs, by the brokers.

Related: Margin Changes to Shake up the Online Trading Industry?

Although in principle all this looks healthy, this regulation fails completely because it does not adapt to the needs of retail customers as it would require much more capital to invest in different assets. Additionally, the massive reduction in leverage will put a great barrier to entry. Meaning retailers will eliminate even the possibility of trying to negotiate or invest for some people. On the other hand, margin closing rules do not make sense, because if the trader’s strategy involves reversion to the average and systems based on time scales or pairs, it is expected that some positions will be executed negatively ahead of time.Finally, these new policies give rise to the appearance in the market of pirate brokers without any regulation, which will put the investor’s capital security even more at risk. At Tradeview, our CIMA regulation allows us to continue offering our clients all the advantages of leverage, margin and protection of negative balances under a strong and secure regulation for the retail client.

Maria Fernanda Isaza


Maria Isaza
Business Development

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Tradeview Ltd. is not a portfolio manager or an investment advisor. This Market Report is for informational purposes only. Any statements made or opinions voiced in this Market Report do not constitute investment advice. The Tradeview Ltd. Market Report does not constitute a solicitation to buy or sell in the financial markets. Although the information contained in the Market Report comes from trusted sources, Tradeview Ltd. is not responsible for guaranteeing the accuracy, timeliness, completeness, or fitness of such sources. Tradeview Ltd. shall not be responsible for and disclaims all liability for any losses which may be suffered from access and use of the contents of the Tradeview Ltd. Market Report. Trading any financial instrument on margin, using leverage or otherwise involves considerable risk. Therefore, before deciding to participate in any style of trading, you should carefully consider your investment objectives, level of experience and risk appetite. Most importantly, do not invest money you cannot afford to lose. Consulting with your investment counselor, attorney, accountant or other professional upon whom you rely for guidance as to the appropriateness of an investment in any style of trading is recommended.

Tradeview Ltd.

Is licensed to carry on securities investment business and is regulated by the Cayman Islands Monetary Authority (CIMA) as a full securities broker-dealer. Tradeview conducts business pursuant to the Cayman Islands Securities Investment Business Law (SIBL) and its activities fall under the direct supervision of the Investments and Securities Division of CIMA.
Headquarters: 5th Floor Anderson Square, 64 Shedden Road, Georgetown, Grand Cayman, Cayman Islands KY1-1002, BWI.

Tradeview Asia Ltd.

Is licensed and regulated by the Labuan Financial Services Authority (FSA) as a Money Broker, registration number LL15870 licensed to facilitate transactions in foreign exchange pursuant to Labuan Financial Services and Securities Act 2010, the Labuan Companies Act 1990 and the Labuan Business Activity Tax Act 1990.
Headquarters: International Business Financial Centre at Office 5, Jamie Business Center I, Unit F10, First Floor, Paragon Labuan, Jalan Mustapha, 87000 Labuan F.T.

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Is licensed as a Category 2 Investment Service Company and is regulated by the Malta Financial Services Authority (MFSA). The Malta Financial Services Authority (MFSA) is the single regulator for financial services in Malta. MFSA is a fully autonomous public institution and reports to Parliament on an annual basis. The MFSA is a member of the European Banking Authority (EBA), the European Securities and Markets Authority (ESMA) and the International Organization of Securities Commissions (IOSCO) and is a signatory of the Multilateral Memorandum of Understanding with other European regulatory Institutions. Tradeview is authorized to provide financial services across multiple asset classes and is passported in the EU/EEA under MiFID II (EU Markets in Financial Instruments Directive).
Headquarters: 157 Archbishops Street, Valletta VLT Malta 1440.

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Is authorized to conduct business pursuant to and in compliance with the General Law of Companies (LGS) promulgated by the government of Peru. Tradeview Financial Markets S.A.C is registered with the National Superintendence of Public Registries (SUNARP), company number 13089531. Tradeview Financial Markets S.A.C provides financial services in selected OTC derivative markets in compliance with all applicable government regulations.
Headquarters: Los Mirtos 239 Urb. San Eugenio, Lince, Lima, Perú.