Commission de surveillance du Sector Financier (CSSF) Regulation N° 19-06
A restriction on the marketing, distribution or sale of CFDs to retail investors. This regulation consists of: leverage limits on opening positions; a margin close out rule on a per account basis; a negative balance protection on a per account basis; preventing the use of incentives by a CFD provider; and a firm specific risk warning delivered in a standardised way.
The CSSF regulation N° 19-06 restricts all firms acting in or from Luxembourg to market, distribute or sell contracts for differences (CFDs) to retail clients starting 1st August 2019.
The CSSF’s rules are in substance the same as the European Securities and Markets Authority’s (ESMA) existing EU wide temporary restrictions on CFDs that were adopted under Article 40 of Regulation (EU) N° 600/2014 of the European Parliament and of the Council of the 15 May 2014 on markets in financial instruments and amending Regulation (EU) N° 648/2012 (MiFIR).
Furthermore, the CSSF confirms that all conditions under Article 42 paragraph 2 of Regulation (EU) n° 600/2014 (MiFIR) are fulfilled.
These product intervention measures include:
1. Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, which vary according to the volatility of the underlying:
- 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;
2. A margin close out rule on a per account basis. This will standardise the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more retail client’s open CFDs
3. Negative balance protection on a per account basis.
4. A restriction on the incentives offered to trade CFDs; and
5. A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts
What does this mean for Trading on the HMS TraderPro and HMS TraderGo Platform?
Several changes have already been applied since August 2018 in regards to both CFDs and Spot Forex Products, no additional changes will be made based on this new regulation, the already implemented changes are as follows;
1. Leverage limits on the opening of a position by a retail client
HMS has implement an structure composed of an “Initial Margin” and “Maintenance Margin” This structure will be reflected on the platform under the "Trading Conditions"
For further details please refer to the following file
2. A margin close out rule on a per account basis.
A 100% immediate stop-out level is now a regulatory requirement for Forex and CFD trading. Therefore HMS is required to enforce a strict 100% stop-out based on the maintenance margin. In addition HMS will send margin calls at 75% and 90% margin utilisation.
3. A standardised risk warning
A Standardised Risk Warning is displayed whenever a client opens the platform. This has been updated to meet the new regulatory requirements and it now includes a tool which enables the client to review and change his/her categorisation in the context of the MiFID framework.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
65-75% of retail investor accounts lose money when trading CFDs.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
For additional details: Règlement CSSF N° 19-06 du 26 juin 2019
EUROPEAN SECURITIES AND MARKETS AUTHORITY DECISION (EU) 2018/796