In August, the European Securities and Markets Authority (ESMA) measures in relation to Contract for Differences (CFDs) took effect.
One of the most significant measures of this regulation was to impose new leverage limits which vary according to the volatility of the underlying asset. Leverage basically involves the borrowing of capital from the provider to get a greater exposure and therefore can contribute to higher profits or losses.
Leverage limits set are between 30:1 and 2:1. See breakdown below:
• 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;
• 2:1 for cryptocurrencies;
The above leverages and the restriction in the marketing, distribution or sale of CFDs to retail investors have been confirmed.
The prohibitions in the marketing, distribution and sale of binary options have also been confirmed by the European authorities.