FCA regulated CFD broker Plus500 Ltd (LON:PLUS) has issued its response to the proposals made late last week by pan-European regulatory authority ESMA to severely rein in the world of online leveraged trading in the EU.
ESMA’s proposals included:
- a total ban on Binary Options marketing and trading in the EU
- leverage restrictions on Forex and CFD trading of between 5x and 30x
- negative balance protection on client accounts
- ban on bonus payments to retail clients, inducing them to trade
Plus500 stated that it “welcomes this statement and the strong regulatory framework that this will bring to the industry.”
Unlike its main rival in the online CFD trading business, IG Group Holdings plc (LON:IGG), Plus500 didn’t have anything negative or critical to say about ESMA’s proposals. IG was very clear in its statement on the matter, saying that the 30x leverage cap was “disproportionate” and likely to push European traders into the arms of offshore, unregulated brokers offering higher levels of leverage which traders are used to.
As far as how the proposals would affect the company, Plus500 admitted that “it is difficult to assess the impact upon our business”, but said that it has a “flexible business model” and is well diversified globally with seven licenses in different jurisdictions following the recent licence approval in Singapore earlier this month.
The full statement issued by Plus500 reads as follows:
18 December 2017
Plus500 Ltd. (“Plus500” or “the Company”)
Plus500, a leading online service provider for retail customers to trade CFD internationally, today provides an update regarding the recent statement by ESMA, the European Securities and Markets Authority.
ESMA provided an updated statement on the preparatory work in relation to CFDs and other products offered to retail clients on Friday 15 December. It also commented that it will conclude its consultation in January 2018 with official trading restrictions to be announced then.
Plus500 welcomes this statement and the strong regulatory framework that this will bring to the industry. On the main points highlighted by this statement, Plus500 reiterates that the Company has never offered binary options and has always provided balance protection to its customers across all its product offerings in all its markets, as a core principle of its business model. The Company also has a maintenance margin level which enables its customers to have additional protection. As at January 2017, Plus500 removed its bonus schemes for the vast majority of its operations.
At this stage, Plus500 will wait for the conclusion of the consultation expected in January 2018 to understand where it will need to implement necessary adjustments to its business model.
Asaf Elimelech, CEO of Plus500 commented:
It is positive to have an update from ESMA, as this provides us with more transparency as to the regulatory changes that may be implemented in January 2018.
We look forward to working with our regulators through the consultation period and establishing detailed procedures to ensure the proposed measures operate effectively. Until those details are finalised, it is difficult to assess the impact upon our business, however, as we have previously stated, we have a flexible business model, already provide many of the protections suggested by ESMA, and are well diversified globally, now with seven licenses in different jurisdictions following the recent licence approval in Singapore earlier this month.