What is ESMA and how does it affect my trading experience?

The European Securities and Markets Authority (ESMA) recently announced new measures for trading CFD products for retail customers. These measures include leverage restrictions (detailed below), negative balance protection and Margin Closeout restrictions, all of which are being introduced in order to protect retail clients. 

The new restrictions came into effect on August 1st, 2018.

As a regulated trading platform, eToro is fully compliant with the above regulations.

According to the new ESMA intervention measures, leverage rates can only be offered between a margin of 2:1 and 30:1, depending on the specific instrument.

The new leverage limitations are as follows:

  • 30:1 for major currency pairs (such as EUR/USD)
  • 20:1 for non-major currency pairs (such as EUR/NZD), gold and major indices
  • 10:1 for commodities with the exception of gold and non-major equity indices
  • 5:1 for CFD stocks
  • 2:1 for cryptocurrency

Margin Closeout will be set at 50%, meaning that the Stop Loss setting on eToro will be limited to a maximum of 50% per trade.


Please note:

  1. The above changes will not affect open positions. However, should you decide to edit an existing position, the new margin requirements (50%) will apply to those trades

  2. On July 29th, 2018, all open orders with 25:1 leverage were automatically reduced to a leverage of 20:1.

  3. New limitations will not apply to copied positions, providing the copied trader is classified as a Professional Client.


How do I know if these changes apply to me?

The above changes will apply to all eToro customers, with the exception of those with Elective Professional Client status.

Clients with Elective Professional status are entitled to certain benefits, however, they are not entitled to all the same protections as retail clients.

To learn more about what it means to be an Elective Professional Client and how to apply, please check out the relevant blog post.