EU Watchdog to set Limits on CFDs and Cryptocurrencies

ESMA has declared leverage limits on the provision of contracts for CFDs and cryptocurrencies for retail investors in the EU
28 March 2018   567

The European Securities and Markets Authority (ESMA) announced these measures as temporary ones. The orders will be issued in the EU's official journal and come into force in one month for binary options and two months for CFDs.

The intervention measures for CFDs contain leverage restrictions on the opening of a CFD by a retail client from 30:1 to 2:1. The impact limits are: 30:1 for major currency pairs; 20:1 for non-major currency pairs, gold and major indices; 10:1 for commodities other than gold and non-major equity indices; 5:1 for individual equities and other reference values; and 2:1 for cryptocurrencies.

The other intervention measures include the following:

  • a margin implementation rule per account. It will ration the percentage of of margin at 50% of minimum initial required margin, demanding providers to close out 1 or more of a retail consumer`s open CFDs; 

  • the account basis protection from the negative balance. This will state a guaranteed limit on retail client losses;

  • the bound of the motivation suggested to trade SFDs;

  • a risk prevention comprising the percentage of losses on a CFD provider`s retail investor accounts, delivered in a normalized way.

So the market for financial instruments providing exposure for cryptocurrencies will be closely monitored. The application of leverage limits can also maximise the possibility of a larger gain. Automatic margin close-out makes a degree of defence for investors as it declines, though it does not exclude, the risk that the investor loses all or more than their initial margin.

ESMA has decided to will implement a 3-month ban on the marketing, distribution or sale of binary options to retail investors since the risks connected with the inherent features of binary options, such as an expected negative return and inherent conflicts of interest, make these products unsuitable for retail investors.

In contrast with the options that can serve a valuable role in hedging exposure to certain assets, binary options do not correspond any real investment needs for retail investors. These options can also attract compulsive gambling behaviour.

Caspian to Launch Crypto Derivatives Trading

Caspian does not charge commissions for depositing and withdrawing funds and provides leverage up to 100x
21 March 2019   81

Caspian, an asset-oriented asset management platform, has launched cryptocurrency derivatives trading.

Thanks to integration with Deribit, Caspian customers gained access to trading in futures and options for Bitcoin and Ethereum. Also, the platform will provide the opportunity to trade indefinite bitcoin-swap.

According to Caspian, the platform does not charge commissions for depositing and withdrawing funds and provides leverage up to 100x.

We are excited to be working with Deribit to make the trading of crypto options and futures possible within the institutional community. Our goal at Caspian is to provide crypto traders and investors the same standard of tools and service that exist in the traditional markets and its great knowing that the team at Deribit is working towards the same high standards.

Robert Dykes

CEO, Caspian

Caspian noted that their platform connects to Deribit via an API that supports “large trading volumes with extremely low latency”. The platform also has full access to the book of orders of the crypto-derivative stock exchange.