The future of CFDs (SB)?

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Viewing 15 posts - 31 through 45 (of 61 total)
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  • 01/25/2018 at 1:07 AM #60462
    verdi55
    Eric wrote:

    And what about this..? ”

    Information about ESMA’s margin close-out proposal
    In addition to the leverage restrictions detailed in our previous email, ESMA is suggesting a 50% margin close-out rule on a position-by-position basis.

     

    Well that’s a loss of more than 300 points with the current DAX price and a proposed margin of 5%. Most of my DAX systems have a maximum stop loss of 300 points, so this is about the same. Although I’d like to decide myself when my positions need to be closed and when not.

    01/25/2018 at 1:37 AM #60464
    Nobody
    verdi55 wrote:

    OK, so let’s go offshore to Geneva, in case the ESMA remains stubborn. Nice place with a lake. Australia or Singapore are other alternatives…

    Singapore has one of the lowest income taxes on planet and a stable currency  .  You will need a singaporean bank account which is not easy but still doable .

    01/25/2018 at 11:44 AM #60491
    Nicolas

    These are informations I gathered about the ESMA regulation:

    The possibilities that we have been hearing about for several months are: prohibition of advertising / total prohibition of products / prohibition of loss greater than the value of the position or the account / strong limitation of the effects of leverage / limitation to professionals *.
    (* the definition of professionals varies from one country to another.In France, you need either a portfolio of more than 500K, or have a professional experience of more than 12 months in the financial sector)

    Some brokers lobby against this regulation, either directly or by asking their customers to contact ESMA to make their voices heard. IG has opened a specific website to encourage their customers to write to ESMA: https://replytoesma.trading/

    In coherence with what already exists, ESMA could take a position similar to those already taken by France (prohibition of promotion if the account is not at limited risk), Belgium (prohibition of promotion) or the Germany (prohibition of service provision if the account is not at limited risk).
    On the other hand, ESMA has been widely criticized for being late in reacting to regulate CFDs … so hopefully they will not go further than expected in the regulations just to baffle their detractors.

    • If all countries go to Risk Limited => This is harmful to Automatic Trading because we are more limited in terms of money management.
    • If the effects of levers are severely limited, this will bring the margins on CFDs margins closer to Futures, which will greatly limit the interest of CFDs. To compensate for this, one can imagine that CFDs brokers would put forward mini-contracts (with more expensive brokerage fees).
    • Complete ban: I can not imagine that they can do it given the financial windfall and the amount of jobs that the CFD industry in Europe represents.
    • Restriction to pros: it would be the same thing in practice as a complete ban…
    01/25/2018 at 12:57 PM #60492
    Juan Salas

    Dear all,

    After Nicolas’ information, and reading about our opinions on different alternatives related to opening accounts abroad (which is rather complicated and is too risky from a fiscal perspective. I have been there), I believe right now, all our efforts should be focused on complaining to ESMA and make our voices heard through the different complaint forms that our brokers have provided us.

    Lately, IG has been sending me a request to switch into a Professional Customer. I haven’t checked what are the requirements and pros and cons, but if the information floating around confirm the 500K portfolio, I think not many people will choose that option. I could understand becoming a professional if most brokers would consider our accounts seniority and a standard test from ESMA, and lower the requirements in term of financial assets (i.e.-10k,50k). That will leave the new legislation’s requirements to new comers.

    Regards,

    Juan

    01/25/2018 at 1:23 PM #60502
    GraHal

    A solution more practicable, workable and amenable to all would be for – all deals on a particular  account – a running tally be monitored such that …

    If Margin + Loss > 50% * Account Funds Then
    Broker to Auto-Exit Losers in 1 Lot multiples //until Margin + Loss < 50% * Ac Funds
    Repeat as necessary
    Endif

    With a 50% (of A/c Funds) safety net, above would surely prevent anybody blowing their account?

    If loads of us submitted above (or a better idea?) via the broker / ESMA Forms then this would be more effective than saying ESMA proposals are unworkable etc?

    GraHal

    01/25/2018 at 1:50 PM #60507
    verdi55
    GraHal wrote:

    If loads of us submitted above (or a better idea?) via the broker / ESMA Forms then this would be more effective than saying ESMA proposals are unworkable etc? GraHal

    I think the best way to respond would be : the proposed ESMA regulations are appropriate to protect inxperienced traders, but not for clients with several years of experience.

    So, if ESMA should limit all of this to traders with less than one year experience (quite similar to the actual situation with IG accounts in France, I think), most of us would not have any problem.

    This would mean : anyone opening a CFD account with a new broker would get the highest level of safety for at least one year, that is : low leverage, mandatory guaranteed stops, no negative balance protection, and so on.

    This is the way to go, I’d say, not making things even more complex.

    2 users thanked author for this post.
    avatar Inertia, avatar Juan Salas
    01/25/2018 at 2:23 PM #60514
    GraHal

    A few thoughts sprung to mind …

    Wouldn’t the 12 months experience need to be qualified, for example > x number of significant deals?

    Otherwise, a newbie could open an account do a few mini deals and then be classed as experienced trader after 12 months?

    Also if 12 months has to be experienced on the (new) broker platform then that kinda creates a barrier to entry / discouragement  for trying other brokers / platforms (as a newbie again for 12 months?).

     

    01/25/2018 at 2:32 PM #60515
    verdi55

    Take 12 months experience + a certain number of deals. The latter is already an official legal criterion for classification as a professional. In Germany, the legal rule says you need to have carried out at least 10 trades with a “significant” volume per quarter during the past year. What “significant” means, is up to the broker or the client, I guess.

    01/25/2018 at 3:05 PM #60516
    verdi55

    Just got a phone call from IG Switzerland : It is no problem at all to open an account there as a foreigner. ESMA regulations should not apply there, either. Thanks to user @barbagio, again.

    In Geneva, they did not know exactly what the PRT premium version is, but if you tell them you want it before opening the account and apply for the premium version at the PRT website at the same time, this should be no problem either, both the IG representative in Geneva and the PRT costumer service in Paris told me.

    2 users thanked author for this post.
    avatar EB, avatar GraHal
    01/25/2018 at 5:39 PM #60525
    verdi55

    Update : IG support from Switzerland just told me that they do not offer the PRT premium version there. But still, it is possible to trade automatically there with the PRT complete version, and without ESMA regulation.

    What the Swiss financial authority FINMA will say to CFDs may be a different story.

    01/27/2018 at 8:26 AM #60654
    victormork

    @verdi55 thanks for the suggestion. This is something I’ll look into in case the new regulations doesn’t come out in a way that is suitable for me.

    02/08/2018 at 9:01 PM #62074
    Eric

    IGs reply

     

    https://replytoesma.trading/src/assets/IG_Group_response_to_ESMA_call_for_evidence.pdf

    1 user thanked author for this post.
    avatar verdi55
    02/08/2018 at 9:26 PM #62075
    verdi55
    Eric wrote:

    IGs reply https://replytoesma.trading/src/assets/IG_Group_response_to_ESMA_call_for_evidence.pdf

    An interesting detail from the document :

    The actual proportion of profitable accounts across IG’s European clients for the calendar year 2017 was 24%. We believe this is likely to be very similar to the result for on-exchange futures traders, or for active traders of any other leveraged speculative financial product, such as warrants or turbos. Speculative trading is a zero sum activity and transaction costs act as a drag on performance, regardless of the instrument being traded. Though individual clients may register significant profits or losses, the average client P&L for IG clients in a typical year is a loss equal to the average transaction charges our clients choose to pay us over that year in order to gain exposure to financial markets.

     

    If it is true, this is further proof that trading is gambling…

    03/22/2018 at 2:31 PM #66091
    barbagio

    Guys,

    any news from ESMA? I didn’t see any update neither receive info from IG.

    03/22/2018 at 4:50 PM #66103
    verdi55

    The ESMA guys have to read more than 10.000 letters, which may take them a while. The association of CFD brokers in Germany sent them quite a harsh statement threatening with tough legal action they will also have to reflect on first.

    http://www.cfdverband.de/wp-content/uploads/2018/02/Final-2018-02-05-Response_Contracts-for-Difference-Verband_ESMA-Call-for-Evidence_final.pdf

    1 user thanked author for this post.
    avatar GraHal
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