CySEC Proposes New Product Intervention Measures
CySEC, a Cyprus based regulator, is proposing new national product intervention measures that would benefit particular clients. The company is offering three new tiers for leveraging, affecting different kinds of retail clients. Effectively these measures would create an upper tier category that will benefit experienced traders that are aware of high leverage risk. There will also be a lower tier for clients unaware of the dangers on CFD product.
The regulator elaborated further by explaining that retail clients have been exhibiting different levels of wealth and sophistication, prompting them to propose these new intervention measures. The MFID II Regulations are already creating a distinct difference between professional and retail clients as it is.
Upper Tier Retail Clients
CySEC has determined that there are retail clients who immediately fall in the “Upper Tier” category, being in a continual market trend. These clients can take on losses as a result of their superior trading experience. The regulator believes that with client communication between brokerages, leverages can bump up to 50:1 in the case of Forex Pairings. Top tier clients will additionally receive a 30:1 leverage of Gold, Indices and FX Pairs. However, commodities such as stock benchmarks drop to a leverage of 20:1. Retail clients willing to trade on single stock CFD’s will receive a 10:1 leverage.
Clients can request for reclassification with brokers. However, the result will be set by predetermined criteria. Provided that these new intervention measures are implemented, customers who use the 50:1 leverage will need to have €200,000 in liquid assets and make a minimum of €40,000 yearly income. Clients will also have to demonstrate that their awareness of the risks associated with contract-for-difference trading by providing they’ve carried out a minimum of ten CFD transactions of significant size.
CySEC seems to be copying the Polish Forex Regulator, as they back in April announced that they’d be introducing a tier system for retail clients.
CySEC on Foreign Exchanges
CySEC is the first regulator to address clients moving to offshore jurisdictions for trading. However, clients are far less protected at these foreign exchanges. This prompted the regulator to introduce higher leverages, looking for the perfect balance in the market. Ultimately, this is welcome news as the European Union’s approach to risk-trading hasn’t been complimentary. Brokers will still be welcome clients if government authorities approve these new product intervention measures.