Calling all traders. You’ve only got until the 5th February to give your feedback to ESMA on leverage cuts

Broker of the month: City Index, read our expert and client reviews here

ESMA, the European Securities and Markets Authority is considering proposals to reduce the amount of leverage available to private clients trading CFDs, FOREX and spread betting to a maximum of 30:1.

Be more informed about brokers and trading with our newsletter. Sign up here...

Leverage has historically been as high as 500:1 so this may significantly reduce the amount of exposure clients can trade on.

Clearly there are good and bad points to this and certainly reduced margin along with negative balance protection (i.e. you can’t lose more than your account balance) is a good thing for the majority of inexperienced traders.

However, for experienced, professional and clients using CFDs and spread betting for hedging purposes this will have a big impact.

Here are the margin rate maximums that ESMA is proposing:

  • 30:1 leverage on major currency pairs, increasing margins from 0.5% to 3.33%
  • 20:1 leverage on major indices, increasing margins from 0.5% to 5%
  • 10:1 leverage on commodities (excluding gold), increasing margins from 2% to 10%
  • 5:1 leverage on equities, increasing margins from a min of 5% to 20%

If you’d like to give your feedback to EMSA answer this question: What impact do you consider that the envisaged measures would have on retail investors? on a Word document and upload it here.

Or you can comment on this site set up by IG

Good Broker Guide Featured Brokers

Looking for institutional broker? Compare prime brokers here

Richard started the Good Broker Guide in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously acting as multi asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2000.

Sponsored Good Money Guides