GAIN Capital on ESMA CFD leverage restrictions: less than 5% of Revenue at risk

Gain Capital forex.com

Retail and Institutional FX brokerage group Gain Capital Holdings Inc (NYSE:GCAP) has issued a formal statement following this morning’s news that pan-European financial regulator ESMA is following through on plans to ban Binary Options and (more importantly) cap leverage in Forex and CFD trading to 30x.

GAIN Capital operates the retail Forex.com and City Index brands, and GTX institutional FX platform.

While applauding ESMA’s attempts to enhance consumer protection in the FX and CFD markets, GAIN did say that it does not agree with every aspect of the new rules.

As far as financial impact, the company indicated that as a result of its geographic diversification, it believes that ESMA’s new regulations place less than 5% of full year 2018 total revenue at risk.

The full statement issued by GAIN Capital reads as follows:


GAIN Capital Responds to ESMA Statement

Company does not expect the new regulations to have a material adverse effect on its overall financial results

BEDMINSTER, N.J., March 27, 2018 /PRNewswire/ — GAIN Capital Holdings, Inc. (NYSE: GCAP) (“GAIN”, “The Company”) notes that the European Securities and Markets Authority (ESMA) and the Financial Conduct Authority (FCA) have issued statements announcing regulatory changes in the provision of contracts for difference (CFDs) to retail clients.

The measures on CFDs are being introduced as a temporary intervention on a three-month basis, during which ESMA and FCA will reflect on whether it is necessary extend the intervention measures for a further three months or on a permanent basis, respectively.

While GAIN does not agree with every aspect of ESMA’s new rules, the Company is strongly supportive of measures that enhance consumer protection in the FX/CFD market and elevate standards across the sector, including curbing aggressive marketing to inexperienced investors and mandating disclosure requirements that ensure all clients fully understand the risks of FX/CFD trading.

GAIN operates a diversified business, which includes a retail FX/CFD business spanning eight regulatory jurisdictions, a U.S.-based retail futures business and an institutional trading business. As a result of this diversification, as well as due to actions being taken by the business to mitigate the impact of ESMA’s proposed regulations, the Company believes that ESMA’s new regulations place less than 5% of full year 2018 total revenue at risk, based on an anticipated implementation date of the end of the second quarter of 2018.

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