MARKETS.COM, the FTSE 250 listed CFD broker, has announced that it has introduced a lower default leverage ratio of 1:50 as well as the option to select 1:25, 1:100 and 1:200 leverage ratios on certain underlying instruments, in conjunction with their leverage policy.
This follows CySECs announcement late last year that they would be reviewing the practices of their members to ensure greater protection of clients from the considerable risks that leveraged trading can pose. CySEC has ordered companies to design their trading systems in a way that offers retail clients, as a default, the lower leverage determined in an established and a board-approved leverage policy.
CySEC regulated brokers must also limit the level of leverage they offer their clients that do not pass an appropriateness test – or limit the sum that a client can invest, in any one period of time, while ensuring their maximum loss does not exceed the client’s available funds.
The UK’s Financial Conduct Authority and Germany’s BaFin have begun similar initiatives in what is likely to be a global clampdown on leveraged financial products.
This is a really sensible move from MARKETS.COM and great news for beginners wanting to trade CFDs. What does it mean for you? Well, you won’t be trading with such a large ratio, meaning any losses you incur as a result of an unsuccessful trade will be significantly smaller than it would have been with a leverage ratio of 1:200. The flip side is that your profits from a winning trade will be smaller too. However, we feel this is a small price to pay for the added safety now in place. We hope this is the first of many of these types of announcements as regulators put greater pressure on brokers to comply.
You can compare the services of MARKETS.COM against other CFD or FX Brokers here.
