ESMA - List of instruments with breakdown of leverage levels

Already in a month (1 August 2018), the regulatory changes introduced by the European financial supervision (ESMA) will come into force. Changes seem to be crucial for traders, and there are no doubts. One of them is the division of instruments that will be covered by different levels of leverage. Below we present detailed information on this subject.

Impact on open positions

Changes in leverage can (but they do not have to) affect items that were opened before the date of ESMA regulation. The decision to leave or change the leverage for previously open positions is taken by each broker individually. As we have managed to determine, the technical aspects on the side of trading platforms will decide about the settlement.

It is worth noting that in the construction of its infrastructure, no broker assumed such radical changes as the entry into force of the ESMA regulations that were established this year.

In the event that the broker decides to reduce it will mean that if you currently use the lever 1: 100 and you have an open position that you hold until 1 August, on the same day the broker may be forced to charge an additional margin meeting the new conditions . If you do not have an adequate reserve of free funds, the Margin Call mechanism will work and then stop-out (automatic closing of the position).

It is recommended to self-recalculate the reserve for collateral, or reduce the volume of items to avoid such a situation.

Currency pairs

The new regulations introduce a division into two categories:

• major currency pairs - leverage 1:30,
• other currency pairs - leverage 1:20.

The first category includes such pairs that consist of USD, EUR, JPY, GBP, CAD and CHF. Includes any combination of these currencies. It is worth noting that this division is different than that known to many traders from books, trainings or even thematic websites and tables with the specifications of Forex brokers. The group of other currency pairs includes all other combinations.

The NZD and AUD currencies, which are widely regarded as one of the most popular, have been completely excluded from this division. This means that pairs like AUD / USD or NZD / USD are not considered main, while such pairs as GBP / CAD, CHF / JPY or EUR / CAD Yes.

Stock indices

Another doubts are born CFD instruments based on stock exchange indices. Here the breakdown is similar to that of currencies.

There are two categories:

• main indices - leverage 1:20,
• other indices - leverage 1:10.

Here, the selected division is more logical. The first group consists of CFD based on: FTSE 100, CAC 40, DAX 30, Dow Jones, S&P 500, NASDAQ, Nikkei 225, ASX 200, EURO STOXX 50.

The remaining group includes all other unlisted indexes, i.e. Spanish IBEX 35, Swiss SMI or native WIG 20.

Precious metals, raw materials and goods

Another category that arouses little controversy. A simple division into:

• Gold - leverage 1:20,
• Raw materials and goods - 1:10

Gold was the only one in this group to remain on "preferential" leverage conditions. As you can see, silver (XAG / USD, which brokers offer as often as gold, has been decoupled from gold by the amount of leverage, making it a part of a broad group of “commodities and commodities.” This category also includes popular crude oil of all varieties.

Shares and bonds

The last groups of instruments are CFDs based on shares, bonds and interest rates. Here, no complicated distinction is made and for all these groups the maximum leverage is 1: 5.

Cryptocurrencies and binary options

Binary options have definitely been excluded from trading, which definitely end their career on the European market, and from 1 on July 2018. Cryptocurrencies still remain, but for them the leverage will be only 1: 2. In order to be able to continue trading with Bitcoin and the company, in some cases it will be necessary to change the classification from a retail client to a professional client. Some brokers have completely withdrawn this group of instruments for retailers.

You can read more about the status of a professional client, the benefits of this and the procedure to be followed in a separate article.