ESMA (European Securities and Markets Authority) has decided to lower leverage rates. Brokers that regulated by national competent authorities who are members of ESMA began to implement the new rules as of August 1st.
Maximum leverage for major currencies that could be offered by European forex brokers is 1:30 from now on. 1:20 for non-major currency pairs, gold and major indices, 1:10 for commodities other than gold and non-major equity indices, 1:5 for company share and 1:2 for cryptocurrencies.
What is ESMA? ESMA is an independent EU Authority that contributes to safeguarding the stability of the European Union’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets.
Traders Divided In Two Categories
With new ESMA regulation rules, investors is divided into two categories: Retail and Professional. Thus, on Professional Account, investors will be able to continue trade with former leverage rates. Also, stop/out level is now updated to %50 with this new measures.
After the criteria, FCA or CySEC licensed forex brokers had to change their leverage rates and stop-out levels, and this caused them to lose customers. Some investors think that lowering leverage rates is a big disadvantage for them and I can say they feel very uncomfortable because of this situation. So, investors are started to look for new reliable forex companies that offer higher leverage rates.
Companies that licensed from ESMA-affiliated regulators such as FCA or CySEC and that are obligated to implement ESMA rules are trying to get different licenses outside of Europe a workaround for the new rules after they get negative reactions from investors.
On the other hand, some brokers that predict these measures to come, has already found solutions. They canceled their FCA licenses or solved the situation by obtaining licenses from other regulators that are not authorized by ESMA.
XM Forex seems to be a more comfortable broker in this situation because they also have ASIC, FSP licenses in addition to FCA. FXTM has FSB and IFSC licenses as well as FCA license. Pepperstone canceled their FCA license and made a decision to continue solely with the ASIC license.