This post is about the new ESMA rules and an alternative offshore broker called GoMarkets that you can sign up with.
ESMA Margin increases
You will have heard about the new European Securities and Markets Authority (ESMA) rules that have come in effect. As a result, minimum margins on all CFD and spread betting markets will increase across the industry. Additionally, ESMA has chosen to ban the marketing, distribution and sale of binary options to retail investors.
ESMA is introducing the following leverage restrictions/increases for retail traders:
- 30:1 leverage on major currency pairs = 3.33% margin
- 20:1 leverage on major indices = 5% margin
- 10:1 leverage on commodities (excluding gold) = 10% margin
- 5:1 leverage on equities = 20% margin
These restrictions will result in increased margins across all markets
A lot of you have asked me what you should do, as if you have an account balance of say £1000, you won’t have much room to trade.
What can you do?
Well, there are a few things.
1 – deposit more money into your account to cover the increased margin. However, depending on your trading size and style, you may need to put in more than you want. You could do lower stakes of course, but do you want to….?
2 – IG and some other brokers allow you to go “professional” – but you need to be eligible and have substantial assets/experience.
3 – stop trading altogether – not ideal really as trading is a useful way to make some extra money and if you are reading this then hopefully being part of my community has led to successful trades.
4 – this is the main one, you can trade with a broker that isn’t subject to the ESMA regulations. Be careful here, as the slightly more dubious brokers (including many binary ones) registered in places like Cyprus are not worth trading with in my opinion. Far too risky in terms of depositing your money with them!
I have been doing a lot of research into this final point and have decided to recommend GoMarkets, based in Australia, licensed and regulated by the ASIC – Australian Securities and Investments Commission. This ensures that your account with them is protected by the Australian equivalent of the FSC.
In a lot of ways they actually look better than some of the UK brokers! GoMarkets are a global broker based in Australia and allow you to fund and hold your account in Pound Sterling as well as other base currencies.
GoMarkets offer over 350 tradable CFD instruments including Forex, Shares, Indices and Commodities. Widely recognised as Australia’s first MT4 broker, they’ve since added MT5, mobile trading and a web-based version to the trading platform suite. GO Markets offers spread-based and commission-based accounts.
Please click below to set up an account with GoMarkets.