ESMA Fail

[Caseynotes]

ESMA admits more retail traders lost money after the introduction of the leverage cap than before, so the exact opposite of the primary intended effect. But not to worry, we're fine says ESMA. 

https://www.leaprate.com/forex/regulations/esma-admits-more-retail-cfd-traders-lost-money-after-leverage-cap/

 

 

[Sunny Days]

Thanks for posting this article... Just shows what a bunch of numpty's they are.. 

[Nelsy-Boy]

Why oh why did we have to have this extra margin? why not just have guaranteed stops (which we pay a little bit more for) and these limits cannot exceed how much money is available in the spread betting a/c. No leverage allowed (funding of account via credit card has never been allowed, has it?) and no financial risk greater than the funds available to bet with. Seriously though. I would appreciate comments from experienced people as to why this was not an option.

[phillo]

it's a joke. Fixed odds betting terminals, lottery scratchcards  online bingo & casino etc. -  nothing   ..   but leveraged trading gets hit.

[wizard1971]

Isn't that the whole point, Retail losing more and more money, the 10% have too live from somebody, the more they loose the better for them.

[PandaFace]

27 minutes ago, wizard1971 said:

Isn't that the whole point, Retail losing more and more money, the 10% have too live from somebody, the more they loose the better for them.

Expand on that? Interested.

[Caseynotes]

Just to play '****'s advocate' for a moment, what say ESMA are looking forward to the failure of their new regulations in order to use it as an excuse to ban CFD's/SB's outright such as is the case in the USA and Hong Kong. Wouldn't put it passed them.  

 

 

[Caseynotes]

@TrendFollower,  the US regulators used exactly the same arguments currently being used by ESMA, that too many retail clients lose too much money ergo they can't know what they are doing and so must be protected for there own good.

The resultant move by US retail clients after the cfd ban into futures and options with much lower available leverage resulted, as expected, in stripping out all the small and many of the medium sized account holders by having a much higher threshold for account size.

The way the EU likes to constantly push new regulations and considering the info in the article in the first post in this thread and remembering esma's complete disregard for the views of retail clients the long term future of cfd's and sb's would seem far from certain. 

 

 

[Caseynotes]

@TrendFollower,

Doubt if many would agree with the need for more regulation as you suggest, that would be going down the esma pathway. No one starting up is not aware of the risk to their capital and most are aware that most new traders will blow one or two accounts on the way to profitability (the cost of learning). 

According to IG they only make on the spread and don't make like a bookmaker, taking the other side of the trade and hoping the punter will be the loser, so it's in their best interest that clients stay afloat and keep trading.

Something like 70% of new business startups fail, banks don't demand proof of success and experience before lending for a startup, if they did there wouldn't be any new business startups.

Available leverage has already come down substantially and this is the problem sighted in the article above. You can no longer start trading with an account of just a couple of hundred quid, you now need a couple of thousand but the new business startup failure rate remains the same at 70 - 80%, so in affect new traders are losing more money due to the regulations implemented in the name of client protection. 

 

[phillo]

One big difference with trading in the USA is the use of options, which I guess make share trading more accessible  I have seen, through watching webinars, how widely these are used

[Caseynotes]

@TrendFollower,

Actually many businesses start up with nothing more than a business plan and a bank loan, experience is not an excluding factor but I see you have lost interest in esma which is the topic of this thread. If you wish to solely discuss business startups why not start a new thread on that subject.

[Kodiak]

Some of these 80% can have other holdings 

Longterm holding stocks in a isa or something else and use spreadbetting or CFD to  hedge?

https://www.contracts-for-difference.com/course/hedging-strategy.html

 

 

 

 

 

[Caseynotes]

@Kodiak, interesting article on hedging and interesting points in that article concerning tax implications. Eg not selling as shares pullback so don't pay capital gains/stamp tax but hedging with a cfd instead and if the cfd backfired can offset loss on any other gains.