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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 will come into effect on August 1st, 2018.

What are the new ESMA restrictions?

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. 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.

As a regulated trading platform, eToro will be compliant with the new regulations.

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 NZD/USD), 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 CFD

*Please note:

  • All open orders with 25:1 leverage will be automatically reduced to a leverage of 20:1. This change will apply to all open orders on July 29th, 2018.
  • After August 1st, all pending orders which exceed leverage limitations will not be executed.
  • The aforementioned pending orders will eventually be cancelled for clients who have not applied/qualified as Professional Traders.

How will this affect you as an eToro client?

First of all, it is important to note that the above changes will not affect open positions. However, if you decide to edit your open position, the new margin requirements (50%) will apply to those trades. In addition, while the restrictions apply to all retail clients, they will not apply to those who choose to apply and be approved as Elective Professional Clients on eToro. However, please be aware that Elective Professional Clients are not eligible for certain other regulatory protection. Although not required, eToro will provide Professional Clients with protections available to retail clients such as “negative balance protection”.

Elective Professional Clients need to meet certain criteria, such as trading volume, transaction frequency and/or professional experience. To apply for Elective Professional Client Status, please fill out this form. If your application meets the criteria, an account manager will contact you.

Please note: The approval process for Elective Professional Clients could take some time. Therefore, if you wish to apply, please fill out the above form promptly, to ensure that your request is approved, (providing you meet the criteria), before the changes come into effect.