ESMA wants constant leverage on Forex

From today, restrictions on the European Forex / CFD market, including reduction of the maximum leverage to 1: 30, will be valid for the next 3 months. This decision was known for a month due to the need to inform with a minimum of 30 days in advance. In theory, the ban will apply for the next 3 months, and at the end of June we will find out if it will be renewed again. In practice, no one has any illusions that this will happen.

1:30 leverage is already "standard"

This summer will be a year away from the moment when the leverage was lowered within the European Union. Some traders have already come to terms with the realities of lower leverage, while the second part decided to emigrate their investments outside the EU.

Be sure to read: ESMA - List of instruments with a breakdown of the amount of leverage

A lot of important data has been sent to us over the past year. KNF, as well as Polish brokers, regularly publish reports showing changes in the profitability of traders. Looking in total, actually improvement in results can be observed from the moment of interventionbut these may be too hasty conclusions due to the lack of accurate data and some discrepancies in some reports.

The European brokerage industry has certainly suffered throughout the intervention, where most companies experienced a decline in profitability. Some brokers had to decide to withdraw from the retail market or total migration and focus on the Asian market. The problem of regulatory arbitrage the Chamber of Brokerage Houses has been paying attention for a long time.

ESMA will give up product intervention?

The European regulator recommended supervisors from the EU to introduce restrictions on the Forex market and CFDs permanently at the national level. One wonders why, since their ESMA guidelines still apply. Does ESMA want to withdraw from product intervention and leave free rein to every country? That would be too beautiful. There is a good chance that such "freedom" Will appear only if previously national supervisors introduce the recommended restrictions. Otherwise, we will probably be condemned to regularly extend the restrictions due to the fact that ESMA has no authority to permanently introduce such an intervention.

Currently, approval has been shown by countries such as Great Britain, Germany, France, the Netherlands and Poland, which are either already in the process of implementing changes or at the stage of "consultation" with market participants to learn about their expectations and needs. Unfortunately, it seems to be just a formality.

See: Effects of ESMA on the OTC market. Debate Invest Cuffs 2019 [Video]