Fintech company Capital.com has become the first CFD trading provider to become fully compliant with the recent regulations published by the European Security and Markets Authority (ESMA). Demonstrating alignment well in advance of the implementation of the regulations, Capital.com is continuing to place its commitment to responsible and ethical trading at the forefront of its business operations.
ESMA has set out a raft of measures designed to protect retail traders from unsustainable risk, including a margin closeout rule of 50 per cent of the minimum initial required margin and a negative balance protection on a per account basis, to prevent users from losing more money than they invested. In addition, ESMA has mandated that advertising cannot include incentives targeting customers, and must feature a specific warning that includes the percentage of losses on a CFD provider’s retail investor accounts.
Ivan Gowan, CEO at Capital.com, explains the company’s approach to ESMA’s regulations: “The changes that ESMA proposed following its consultation are broadly sensible, and responsible CFD providers will have already implemented measures such as negative balance protection and margin closeout, as well as eliminating marketing with incentives. We believe in being fully compliant with all relevant regulation, which is why we have taken the decision to reduce the default leverage limits that we offer now, rather than waiting until the deadline that ESMA will set out. Built on a foundation of market-leading technology and machine learning, we can rapidly adapt our advanced platform to respond to any change in market regulations.”
The regulations developed by ESMA also stipulate that CFD trading providers must reduce the leverage limits that they offer across different asset classes, down to as low as 2:1 for cryptocurrencies. Capital.com has implemented these leverage limits as default settings for its users, to ensure compliance with ESMA’s statement and promote responsible trading.
Ivan continued: “We believe in offering our clients the best possible service and so before the leverage limits are legally enforced, we are offering our clients the option to revert to the higher leverage limits that ESMA’s regulations will eliminate, and we expect to see many of them take up this option. We already offer users leverage based on their experience level – providing those with less experience lower leverage limits. Our clients enjoy using leverage sensibly, it is what makes CFD trading so popular. Coupled with the risk mitigation measures already offered by reputable providers in the industry, and now mandated by ESMA going forward, clients should be free to use appropriate levels of leverage commensurate with their knowledge and experience.
“While some restriction is sensible, an excessive clampdown on leverage risks driving more experienced users to offshore providers which operate entirely unregulated and may, in fact, be sophisticated financial scams. These offshore providers do not offer the same consumer protections as those regulated by European regulators and the risk to consumers of losing their money is often 100%.
“As a responsible CFD provider, we are now compliant with all of ESMA’s regulations. However, we also focus on providing the very best customer experience while mitigating the risks for users. We believe that the best way to achieve this is to implement the measures suggested by ESMA, without limiting leverage rates excessively, to give users the enjoyment that they get from responsible CFD trading, without exposing them to unnecessary risk.”
Capital.com is a Fintech start-up that harnesses the latest advancements in machine learning and AI to provide the ultimate trading experience. With an investment of 25 million US dollars, and growing base of customers, Capital.com currently has 17,000 daily active users. Capital.com has offices in Limassol, Cyprus, London, UK, Gibraltar and Minsk, Belarus. The company develops software solutions in the trading environment, including the Capital.com app of the same name and the supplementary Investmate trading education app.
The company is licensed by CySEC, license 319/17. Trading is risky and you may lose all of your invested capital.
Further information can be found at https://capital.com/