ESMA is an independent EU Authority that contributes to safeguarding the stability of the European Union’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets.
ESMA has agreed on measures in relation to CFDs. The measures restrict the marketing, distribution or sale of CFDs to retail investors, by providing the following protections:
Leverage limits on the opening of a position between 30:1 and 2:1, which vary according to the volatility of the underlying asset:
- 30:1 for major currency pairs;
- 20:1 for non-major currency pairs, gold and major equity indices;
- 10:1 for commodities other than gold and non-major equity indices;
- 5:1 for individual equities and any underlying not otherwise mentioned;
- 2:1 for cryptocurrencies;
- A margin close-out rule on a per account basis;
- A negative balance protection on a per account basis;
- A prohibition on benefits and incentivising trading;
- A standardised risk warning.
- Leverage limits on the opening of a position between 30:1 and 2:1, which vary according to the volatility of the underlying asset:
The ESMA measures will apply to all clients trading with Tickmill Europe Ltd under CySEC, irrespective of their location.
According to ESMA, these measures will apply for at least three months, at which point they may be renewed.
These measures have to be translated into all official languages of the European Union. This process is currently underway and will take a number of weeks.
Once the translation process has been completed, ESMA intends to adopt the measures in the official languages of the European Union.
Once adopted, the measures will be sent for publication to the Official Journal of the European Union in the official languages of the European Union.
The measures on CFDs will start to apply two months after the publication in the Official Journal of the European Union.
The actual date has not yet been determined, but we anticipate the measures to come into effect in July 2018.
The demo account will simulate a live trading environment.
The leverage limits imposed on CFDs set the maximum leverage that providers can offer you when opening a CFD position.
In order to comply with ESMA regulations, Tickmill will be required to reduce the leverage on many of its products from 1:300 to 1:30 for Retail Clients. So, whereas the requirement on a 150,000 EUR position will currently require a deposit of just 500 EUR, this will increase to 5,000 EUR for Retail Clients.
With lower leverage limits investors are protected from certain risks.
In the event you do not wish or do not meet the criteria to be classified as a Professional Client but, at the same time, wish to receive higher leverage, you may be entitled to register under Tickmill Ltd (FSA Seychelles). The condition to be able to register with Tickmill Ltd at the moment is to be a permanent resident of a country outside the European Economic Area.
Under CySEC, eligible clients who trade with Tickmill Europe Ltd are protected by the Investors Compensation Fund (ICF) compensation scheme up to the value of 20,000 EUR. Under the FSA SC, there is no such investor protection scheme.
A Professional Client can be either ’per se’ or ’elective’.
- Per Se Professional Client:
- A client required to be authorised or regulated to operate in the financial markets, including but not limited to credit institutions, investment firms and insurance companies.
- A large undertaking meeting of two of the following size requirements on a company basis:
- A balance sheet total of 20,000,000 EUR or more;
- A net turnover of 40,000,000 EUR or more;
- Own funds of 2,000,000 EUR or more;
- A national or regional government, including a public body that manages public debt, central banks, international or supranational institutions.
- An institutional investor whose main activity is to invest in financial instruments.
- A large undertaking, including a partnership, a body corporate or an unincorporated association, which meet the relevant criteria.
- Elective Professional Client: A client must meet the requirements set by CySEC.
- A client must pass a “Qualitative test”, where we must assess their knowledge, experience and expertise with reference to the nature of the transactions or services envisaged, to ensure that they are capable of making their own investment decisions
- A client must also complete a “Quantitative test” and satisfy 2 of the following criteria, where applicable:
- The client has carried out transactions in significant size and averaged a frequency of over 10 trades per quarter on the relevant market over the previous 4 quarters;
- The client has an investment portfolio and cash investments of over 500,000 EUR in value;
- The client is employed or had been employed in the financial sector for over a year in a professional position that requires knowledge of the transactions or services envisaged.
- Per Se Professional Client:
A client who wishes to be reclassified must meet the minimum criteria to be eligible to become an elective Professional Client. Clients can contact the Compliance Department directly via email or telephone.
A Professional Client must possess the relevant experience, knowledge and expertise to be able to make their own investment decisions and properly assess the risks involved.
Please refer to the criteria set out above, under ’Elective Professional Client’.
At this stage, Tickmill Europe Ltd is not asking for any specific evidence. However, in cases where a client has previously submitted information to us that would suggest that they are unlikely to meet the elective Professional Client criteria, then Tickmill reserves the right to request evidence. Should we require evidence in the future, it will include.
- Evidence of trading activity showing approximately 40 trades of a significant size during the past year.
- Any documentation that shows that the client has worked in the industry in the relevant financial sector for over a year in a professional position requiring knowledge of the transactions or services envisaged.
- Bank statements, share certificates, broker accounts, etc. that evidence 500,000 EUR or more in investments.
Our Retail Clients will enjoy the maximum protection available under CySEC rules. If you do not meet the minimum requirements, then you will continue to be classified as a Retail Client. Kindly note that you should NOT provide false information in order to qualify as a Professional Client.
As a Professional Client, you will not have the following protections afforded to Retail Clients under CySEC:
- Risk Warnings – We will not be obliged to restrict your account with standardised risk warnings and rules that protect Retail Clients.
- Communications – When we communicate with you, we may assume that your level of experience is sufficient to use language that is more complex than with Retail Clients.
- Experience – We may assume your level of experience when determining if our products and services are suitable for you.
- Best Execution – We owe you a duty when executing your orders. As a Professional Client, we may look at other factors when processing trades such as speed and likelihood of execution. For Retail Clients, we are required to prioritise overall cost of the transaction.
- FOS – If you are an elective Professional Client who is not defined as a ‘consumer’, you will not have access to the Financial Ombudsman Service (FOS).
- No leverage restrictions – You might be exposed to higher leverages that can amplify your losses.
- Investors Compensation Fund (ICF): Professional Clients under Tickmill Europe Ltd (CySEC regulated) are not entitled to a compensation by the ICF.
- The margin close-out rule standardises the percentage of margin at which CFD providers are required to close out a CFD or multiple CFD positions.
- The margin close-out has been set at 50% to ensure that investors’ margin is not eroded close to zero.
- Specifically, if the total margin in an account falls more than 50% of the amount of the initial margin required in respect of the open CFD position, the provider must close one or more of the CFD positions.
- The margin close-out rule does not prescribe which positions must be closed out or in what order.
- The negative balance protection limits the maximum losses that a retail investor could have. It is designed as a backstop for cases when margin close-out does not work effectively as a result of a very sudden price movement.
- By introducing negative balance protection per account, the investor can never lose more than the total sum invested for trading CFDs. There can be no residual loss or obligation to provide additional funds beyond those in the investor’s CFD trading account.
Tickmill does not plan to offer credit allocations that will effectively increase the leverage limit.
You can use bank statements, share certificates and SIPS (provided it is not a company pension). This list is not exhaustive.
We will not accept company pensions, physical commodities and fixed assets (including properties and vehicles).
The minimum professional experience requirement is to have worked in an industry and a role that required a good understanding of CFDs and the foreign exchange market for at least one year.
Yes. We will continue to segregate all elective Professional Client funds.
Your funds will not be covered by the Investors Compensation Fund (ICF) if you choose to become an elective Professional Client.
As Tickmill only offers CFDs, a client can be a Retail or a Professional Client. Tickmill Europe Ltd will not be offering a retail and a professional account at the same time. You will be classified either as a Professional or a Retail Client.
Yes, professional clients will enjoy negative balance protection.
No. A relevant qualification alone will not guarantee that someone will become a Professional Client. However, it will be looked upon favourably.
Yes. Please note that you must inform Tickmill Europe Ltd to offer you full CySEC protection and also apply the Retail Client restrictions, including maximum leverage of 30% on CFD positions etc.
Yes, they do. The measures apply to Retail Clients, whether they are individuals or corporations.