The crackdown on margins begins
Time to keep an eye on the emails from your brokers.
ETX Capital has sent one out to customers saying that they will be changing their margin format from 26th May. Citing the new requirements from the ESMA, they will be putting in place a 50% margin close out rule. The change may affect any positions from 26th May.
We’re going to be getting a lot more news about the new margin and leverage changes at borkers so make sure you’re up to speed with your broker correspondence.
Also, let us know how you are planning for all the changes coming. Are you happy to carry on with brokers that make these changes, mostly meaning you have to put more money in your accounts, or would you look to change to brokers outside of your normal (or regulatory) jursidication that won’t be applying the changes? There’s a risk that traders are tempted to join other brokers in countries who won’t be implementing these regs and that opens up extra risk for traders. At the moment I’m in the ‘take it on the chin’ camp.
Philosophy: “Don’t be a Dick for a tick”
Read how Ryan got into trading here
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My account manager “advised” moving to their subsidiary based in Luxembourg. Seems like the best way to go for many of us that cant take in on the chin like you 🙂
How is Luxembourg exempt from the regs Tony?
As long as traders still have regulatory protection, there’s nothing wrong with that. There’s worries if they start jumping to countries with no protection.
As it was explained to me… You can trade with another broker affiliated to a UK broker in a country like Switzerland or Luxembourg where the regulations don’t apply.
Gotcha.
I would have thought Lux would come under the EU rules.
Stuff I’m hearing is that many brokers are “outsourcing” to other operations outside of the Eu juristiction.
Is it a surprise? Nop…. welcome more incomes in CHF world 😉
Hahaha
Hi Ryan,
What broker do you use?
I’m not using any broker, but start to look some reliable broker in UK fo my friend.
Some years I was looking to open account at CFH Clearing had some friends there but things changed and now they under Playtech. I think it’s not good.
Hi Mike
I’ve got a few accounts around the brokers. They’re all pretty much like for like the way I trade. I mostly stick to the larger well known brokers like IG etc but it depends on how your friend wants to trade.
Thanks))
So far nothing my end but if it starts to happen there are 3 possibilities for the retailers who trade higher leverages/lower margins: add funds, reduce positions, change broker. In the last 2 cases, even if the retail market represents only 5% of the global market, there will be a few waves when positions are cut or shifted to a new broker if not carried over at the same company/different entity. Worth watching overall retail open positions in the next few weeks for hints…
BIGGER PICTURE
Seems we’ve been watching narrow(er) daily ranges, across the board. The decrease in leverage may be a sign of some bigger swings a coming. Something is a brewing, day trading getting tougher to trade. Big hand(s) holding ranges. takes away forex trading schools and signal services. Think they’re cleaning house of smaller trades and leaving it to the Real Money and Corporate folks. Gamblers clear out.
We have to adjust to market conditions Kay. Over the last 6-9 months my strategy has been to get in a trade and take profit on some or half as soon as possible, just because, like you say, ranges are smaller.
And yes, we could well have some effects from these margin changes seeping through into volumes and volatility.
Apols for late reply, you ended up in the spammer.
Not to rag on, but I’m more than a novice(tied with Gerry)- interbank market maker, N/A largest FX banks, registered futures and opt trader as well. This thing I smell is deeper than a feeling. More than a cautionary note! Watch your trades closely. STOPS may get blown out( a la SNB). So I advise a more guarded pose for any(ALL) overnight trades.
Remember these are unregulated markets,Getting into a trade is easy, its the other side of the trade that you need(require) to complete the stop loss, no one is your friend. Getting dropped like a stone is also part of the trade.( ask Mike). Seen it happen too many times to count.
By the way read you guys all the time, great gang of guru’s.
I agree Kay. The last few years were all about big trends and now we’re hitting that consolidation period (talking longer time frames here), until the next poop hits the next fan.
Having been in markets since leaving school I know only too well the pitfalls out there. It’s one of the reasons I’m doing this so I can help other less experienced traders look out for them too. If there’s one thing I do know is that when experienced traders such as yourself get that “feeling”, it’s worth listening too.
Thanks for your kind words about the gang. They’re a great bunch but it’s also input from folks like you that’s important as well, so don’t be a stranger 😉