GAIN Capital Unstirred by ESMA‎ CFD Rules, says only 5% of ‎Revenue at Risk

The European Securities Markets Authority (ESMA) continues to receive responses to its new rules limiting the sale of risky trading bets to retail investors.

GAIN Capital said it does not agree with “every aspect of ESMA's new rules,” namely the proposal to cap the maximum Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term. However, the listed firm shows a less concerned reaction compared to its industry peers who mostly described the new limits as highly restrictive and discriminates against retail traders.

GAIN indicated that it operates a broadly diversified business, which includes a retail FX/CFD business spanning eight regulatory jurisdictions. As a result of this diversification across business lines and geographies, the company does not expect the anticipated changes to regulation to have a material adverse effect on its overall financial results.

More specifically, less than 5 percent of GAIN's total revenue, which comes from retail customers in UK and EU, will be at risk.

ESMA announced today a range of product intervention measures such as leverage restrictions, banning binary options, guaranteed limits on client losses and/or restrictions on the marketing and distribution of these products.

The leverage restrictions for retail clients will be introduced in several tiers. CFDs on major FX pairs will be traded with 30:1, indices, non-major currency pairs and gold will be traded at 20:1, while other commodities and non-major indices will be provided with a 10:1 gearing. Brokers will be able to offer individual equities at a 5:1 leverage and Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term at 2:1.

Thus far, the common conclusion among Europe’s regulated forex brokers is ‎that ESMA is setting up an anti-competitive environment as the proposed leverage ‎is an arbitrary, low number.

Despite its stated aim to protect individual investors from losing money, some brokers say that the proposed 1:30 to 1:2 leverage will increase the traders’ risks, because they will need to deposit more capital upfront that they could potentially lose. In addition, those not able to deposit the necessary margin capital might be tempted to use offshore market makers in loosely regulated jurisdictions.