On 1st of August 2018, the European Securities and Markets Authority (ESMA) introduced industry-wide rules and restrictions designed to protect retail clients from the risks of trading with leverage. Saxo strongly supports these rules as a positive measure to guarantee greater investor protection.
These measures include:
Retail clients
1. Leverage limits on the opening of a position by a retail client, which vary from 30:1 to 2:1 according to the volatility of the underlying instrument:
- 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 Saxo is required to close out one or more of a retail client’s open CFDs;
3. Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses.
4. Prohibition from trading specific financial instruments that are only deemed appropriate for professional clients.
Professional clients on large undertaking basis
Industry-wide regulations have been introduced and are designed to protect less experienced traders. The above-mentioned restrictions do not apply to professional traders.
With the MiFID Directive implementation of 2007 Saxo Bank can classify large corporate clients as Professional Clients. These rules are adopted into Danish law by the Danish Investor Protection Order.
To classify a corporate client as Per Se Professional Saxo Bank has to ensure that the corporate client fulfils two of the following minimum criteria:
- Balance sheet total of minimum EUR 20,000,000
- Net turnover of minimum EUR 40,000,000
- Own funds: EUR 2,000,000
Additionally, Saxo Bank must notify the corporate client of the status as Professional.
A Per Se Professional Client is assumed to possess the experience, knowledge and expertise to make its own investment decisions and properly assess the risks that it incurs.