Retail forex broker Markets.com, which operates under the regulatory umbrella of CySEC licensed Safecap Investments Limited, a unit of Playtech PLC (LON:PTEC), sent an email out to clients late last week regarding new trading conditions thanks to rule changes implemented by the Cypriot regulator.
We think that the email (full text below) represents a fairly good summary of what many forex brokers are now doing, to comply with CySEC’s new directives for brokers. LeapRate reported exclusively on CySEC’s plans to tighten rules for Forex and CFD trading – including limiting leverage allowed to retail clients and banning of bonus payments – about a week before the Cyprus regulator made its formal announcement at the end of November.
Playtech recently moved its longtime CFO Ron Hoffman to be the full-time CEO of Markets.com. Markets.com business went through a major restructuring early last year, ending relationships with most IBs and Affiliates and removing incentive compensation for internal sales and retention employees, leading to a mass reduction in jobs.
The highlights of the Markets.com email include:
- changes to be implemented as of January 29.
- lower default leverage ratio of 1:50, with the option for experienced traders to select 1:100 or 1:200 leverage ratios, based on the underlying instruments and the company’s leverage policy.
- negative balance protection.
- termination of bonuses.
- market orders vs. instant orders.
- changes to Margin Close Out level from 20% to 50%.
The full text of the Markets.com email to clients follows:
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Thank you for choosing to trade with Markets.com operated by Safecap Investments Limited (“Safecap”, “we” or “us”).
This communication gives you formal notice of a number of changes to the Terms and Conditions of your trading with us. Some of the proposed changes may have a direct impact on your open positions at 29 January 2017 and thereafter. Action may be required by you based on what we set out herein. We therefore urge that you take time to read this communication carefully. For further questions and enquiries, please feel free to contact us via our Contact Page or by using the Live Chat.
(a) Regulatory changes
Our home regulator – the Cyprus Securities and Exchange Commission (“CySEC”), is seeking to raise conduct standards across the industry for Contracts for Difference (“CFDs”), to ensure fair outcomes for all clients. This initiative by CySEC is broadly in line with guidelines issued by the European Securities and Markets Authority (“ESMA”) and measures introduced or being planned to be introduced by other European Union regulators.
As an investment firm – broker ultimately controlled by Playtech Plc – a London Stock Exchange, FTSE 250 company, with a current market capitalization of c. GBP 2.6 billion, we consider that the fair treatment of all clients, in a transparent and secure dealing environment, is crucial for generating long term trust from clients. We therefore fully support these regulatory efforts and are taking the below action to address these.
(b) Matters covered by this communication that require your attention
*Refer to full analysis in this communication for all the terms and conditions |
(c) Effective date for the implementation of all matters covered in this communication
The effective date for the implementation of all the changes described in this communication is 29 January 2017, unless indicated otherwise herein.
(d) Summary of Key Changes
All the above changes are set out in detail in Appendix 1 to this communication.
Please consider this communication as formal notice of the intended changes to the Terms and Conditions of your trading with us. Please let us know if you require us to take any specific action for your trading account. If we do not receive any advice from you to the contrary, we will consider that you have accepted all proposed changes. In the event of any discrepancies between the terms of the intended changes set out herein (including in Appendix 1) and the revised Terms and Conditions that shall become available at our web-site on 29 January 2017, the Terms and Condition shall prevail.
For further questions and enquiries, please feel free to contact us via our Contact Page or by using the Live Chat.
All of us at Safecap and Markets.com are committed to a culture of treating all our customers fairly. We are committed to offering you a trading experience that brings you, through Markets.com, a diversity of choice and features in over 2,000 CFD instruments, underpinned by our Group’s robust financial and operating standing.
Thank you for your continuous preference to Markets.com!
Kindest regards,
Marios Hadjiyiannakis
Chief Executive Officer
APPENDIX 1 – Summary of Key Changes
- Introduction of lower default leverage ratio of 1:50 Trading on leveraged capital means that you can trade amounts significantly higher than the funds you invest, which only serve as the margin. High leverage can significantly increase the potential return, but it can also significantly increase potential losses.The main regulatory changes and our proposed action are as follows:
For retail clients like you, a lower leverage limit which cannot exceed a default level of 1:50 applies, unless the retail client has opted to change this default level to a different leverage ratio.
Our approach:
- For our existing clients like you, we hereby give you notice that we will continue to offer you the leverage ratios you have already selected for your trading account, unless you choose the lower default leverage level of 1:50 (the “default leverage level”) or any such lower leverage level that may apply based on our leverage policy at the time of your trading. The leverage ratio can be changed as follows:
- If you are a Markets.com Web/Mobile Trader: you can change the leverage ratio to your preferred level via the Menu Tab
- If you are using MT4: you can change the leverage ratio to your preferred level by opening a request via the MT4 “My Account” menu.
- Note that changes may take up to 1 business day to become effective. During this time period your previous leverage ratios will continue to apply
Our leverage ratios across the asset classes of Foreign Exchange (“FX”), Commodities, Indices, Shares, ETFs and Bonds, (“asset classes”, “assets”, “instruments” or “products”) vary between 1:25, 1:50, 1:100 and 1:200. The applicable leverage ratios can be found below:
- Markets.com Trader Leverage Profiles
- Meta Trader 4 (MT4) Leverage Profiles
Note that in line with our Terms and Conditions, leverage ratios are set based on our own internal leverage policy, subject to regulatory requirements and / or ceilings. Whilst every effort will be made to provide you with reasonable notice of any change to the leverage ratio of any instrument or asset class, we reserve the right, acting reasonably, to change leverage ratios with no prior notice to reflect amongst other market conditions and volatility.
If you decide to trade with the default (1:50) or lower leverage levels, this would simultaneously apply to your open trading positions on 29 January 2017. This means that your trading positions will be affected.
For example, if you have an open position in EUR/USD where a leverage ratio of 1:200 currently applies and your initial margin was USD 1,000, the notional value of your position is USD 200,000.
If on 29 January 2017 you wish to change to the default leverage ratio of 1:50, then you will have to deposit an additional amount of USD3,000 (i.e. your total deposit will increase to USD4,000) to support the USD200,000 position. If you do not make the additional payment, then your margin level may decrease to or below the Margin Close out Level (to be changed to 50% on 29 January 2017) and your position will be liquidated.
- For all new clients: all clients will be given the default leverage ratio of 1:50 and have the option during or after their account opening process to change the leverage ratio they would like to trade with. Clients will also be advised of the maximum leverage ratios applicable for individual asset classes or assets, based on our leverage policy.
If you decide to increase your leverage, at a later stage, this would simultaneously apply to your open trading positions.
- Restrictions to leverage ratios for Less Experienced retail clients We are required to consider limiting the level of leverage permitted for potentially Less Experienced Retail Clients.We are implementing the following definitions:
- Experienced Retail Investors: Clients that score high marks in Safecap’s Appropriateness test, demonstrating satisfactory knowledge and experience in trading in complex financial instruments like CFDs;
- Less Experienced Retail Investors: Clients that scored average marks in our Appropriateness test. Whilst such clients are deemed to possess certain knowledge and experience in trading in complex financial instruments like CFDs, their trading is only enabled after they receive extensive risk warnings which they acknowledge, accept and consent to. In order to further protect these clients, we are introducing restrictions on the leverage they can use for their trading with us. These restrictions will apply until the client undertakes 40 trades in 4 consecutive months, with a minimum of 2 trades in each of the four months.
Our approach:
- For our existing clients like you,you have the choice, to change the leverage ratios you trade with to 1:25, 1:50, 1:100 and 1:200, subject to the terms of our leverage policy as described above.
- For all new retail clients that are deemed to be Less Experienced:we will, if we accept to onboard such clients, limit the available leverage ratios at the lower default level of 1:50 or at any lower level set out in our leverage policy applicable at any time.
- The mapping of Less Experienced retail clients to Experienced retail clients that can opt for the higher leverage ratios, will happen automatically on the completion of 40 trades, opened during the first 4 months of trading, provided also that there have been a minimum of two (2) trades opened in every one of the four months. We will notify clients affected of this change as appropriate.
- Negative Balance Protection
A number of Regulators including the German Regulator BAFIN, are recommending that investment firms introduce Negative Balance Protection. Put simply, this means that you cannot lose more than the amount you deposited in your trading account plus any profits generated from trading with such deposits.
Our approach:
We are delighted to note that all our clients have always benefited from Negative Balance Protection. You and all our clients are never liable to us for any losses that exceed the amounts you deposit with us plus any accumulated profits generated from your trading.
- Changes to Margin Close Out level from 20% to 50% and to Margin call notifications
As already set out in the Margin Call Schedule on our trading platform as well as in our Terms and Conditions of Trading, it is your sole responsibility to monitor the margin level of your positions in real time via your web trading platform or your mobile/tablet app.
In order to further protect your interests, we are introducing two main changes:
- We are increasing the current 20% Margin Close out level to 50% in order to ensure that the risk of you losing the bigger part of your equity is reduced. The 50% margin level is the minimum margin you will need to maintain for your open positions.
- If you are a Markets.com Web/Mobile Trader platform client, in the event that the value of your positions falls below 70% of the Initial Margin requirement, we will send you an email and / or any other notification. This is a change from the notifications sent to you currently at the levels of the 60% and 40% of the Initial Margin and acts as an early warning of the performance of your open positions with us. Note that if you are an MT4 client, you will not be receiving any specific notifications at the 70% level.Please note that this is an additional service from us to you and does not create any obligation or responsibility on us, for either the performance of your trading account, or for notifying you of the current margin level and the action that you may wish to take. Please monitor the performance of your positions on an ongoing basis. In addition, we advise you of the following:
- . We reserve the right, acting reasonably, to change at our discretion and with or without prior notice to you, the minimum Margin / Close Out level, in anticipation of evolving market conditions;
- We do not have any obligation and we will not be notifying you of the execution of the Close Out when the Close Out level is at 50%. This is a change from our previous policy where we both notified you at the previous Close Out level of 20% and also allowed you a brief grace period to add funds to your trading account;
- On 29 January 2017, all your positions where the Margin level is below 50% of your available equity, will be liquidated without further notice. Please take action by 29 January 2017, if you so consider appropriate, to either:
- Deposit more funds to your account to increase equity.
- Close some of your open positions.
- Deposit more funds and hedge or average down your current positions.
The above should not be construed to be advice by us of any action that you, at your sole discretion and responsibility, take with respect to the above.
- Termination of bonuses
CySEC has requested that regulated firms avoid the practice of offering bonuses that are designed to incentivize retail clients to trade in complex speculative products such as CFDs. CySEC has also requested that regulated investment firms:
- Let the existing bonuses and other trading schemes lapse, expire or in any other way cease to exist.
- Notify CySEC of any new type of trading benefits that they intend to offer to retail clients, before such are launched to the clients or prospective clients.
Our approach:
We welcome the move by CySEC to control the granting of bonuses.
We consider that aspects like the financial strength of the regulated broker, the trading platform features, the diversity of underlying products that clients can trade in, as well as the pricing, speed, quality and consistency of the execution of your orders are far more important than bonuses. We focus on all these features in our service offering to you.
We are therefore taking and hereby notify you of the following actions:
- All bonuses granted to you and credited to your trading account with Safecap until 29 January 2017, will continue to apply under the “Terms and Conditions for Bonus and Awards” on which they were granted, as mentioned in the Terms and Conditions on our website. We note that Clause 5 of these Terms and Conditions on “Time Terms and Expiration” will apply for bonuses already credited to your trading account.However, upon the utilization or expiry of these bonuses already credited to your trading account, we will not be making available any other bonuses that are currently on offer unless notified herein or in any additional / new communication to you, having previously ensured that they are in line with regulatory requirements.
- Existing clients may from time to time be offered an incentive to switch trading from our web application to our mobile application. This incentive will not be volume related. “Terms and Conditions for Incentives and Loyalty Awards” will apply, as will be set out in the Terms and Conditions of Trading on our website.
- New or existing clients will be offered a non-trading related incentive of USD/EUR/GBP 25 with their account opening for the first time with us and their first deposit. The first deposit (of a minimum of USD 100) is required solely for the purposes of us completing our client due diligence. This incentive does not carry any trading or withdrawal conditions. The client will at all times be able to withdraw its initial or subsequent deposits and / or the award without any restrictions. Relevant terms will be included in the “Terms and Conditions for Incentives and Loyalty Awards” as will be set out on our Terms and Conditions of Trading on our website.
- Introduction of Market Execution mode of trading for our Markets.com Web/Mobile Trader platform
Please note that if you are a client trading on our Markets.com Web/Mobile Trader platform (and not on the MT4 platform), then effective 29 January, 2017 your orders will be executed as Market Orders instead of Instant Orders. This change will ensure you orders are not rejected, unless the market for the underlying instrument has moved (in positive or negative direction) above specific thresholds which we apply symmetrically.
- .Instant orders and Market orders
An Instant Order, as currently available on our Markets.com Web/Mobile Trader platform, is filled only at your requested price, otherwise it will be rejected in case the price has moved by a certain percentage.
A Market Order will be filled at the market price. If the price moves, then you will receive the next best available price and not at the price initially requested.
Example 1
Assume that you place a Market Order to Sell EUR/USD at 1.11352.
During Non-Farm Payroll News, the price of EUR/USD rises significantly reaching 1.11527 and this is the price that then becomes available.
In such case, you will receive the price of 1.11527 instead of the price initially requested. You will not receive a reject in market execution, unless a Spread Limitation occurs as per below.
Example 2
Assume that you place a Market Order to Sell EUR/USD at 1.11352.
During Non-Farm Payroll News, the price of EUR/USD drops significantly reaching 1.11121 and this is the price that then becomes available.
In such case, you will receive the price of 1.11121 instead of the price initially requested. You will not receive a reject in market execution, unless a Spread Limitation occurs as per below.
- Spread Limitation
A Spread Limitation is an event, determined as a percentage of the underlying instrument’s spread, under which the Market order will be rejected.
If the difference of the price you requested and the current market price is within the Spread Limitation, you will always receive the market price. If the difference is more than the Spread Limitation, your order will be rejected. Spread Limitations will, under our culture and policy of Treating Customers Fairly, always apply symmetrically.
Example
Assume a Spread Limitation of 1000%.
You enter a Market order to buy EUR/USD at 1.1155. The spread on EUR/USD is 2 pips (0.0002).
If the price during an important announcement (such as for example a Non-Farm Payroll announcement) jumps by more than 20 pips, your order will be rejected.
However, if the change in the price is less than 20 pips, this will be considered “normal” and will be executed at the available market price. If for example EUR / USD moves to 1.1162, your order will be executed at this price.
- Information on Spread Limitations
Information on Spread Limitations (including spread limitations on underlying instruments and terms and conditions for changes to these) will be available on the Markets.com website. Spread Limitations will reflect our Order Execution policy for treating all our customers fairly.
- Terms and Conditions
Terms and Conditions pertaining to Market orders (including with respect to market / price gapping, spread limitations, implementation of changes thereto, system and price feed issues, etc) will be available on the general Terms and Conditions of Trading on the Markets.com website by 29 January, 2017
- Changes to inactivity fees
Please note that where your trading account with us remains inactive for more than three (3) months from the date of the last trading with us, an inactivity fee of USD 5 currently applies.
We hereby give you notice that, due to the increased account maintenance and compliance costs, effective 29 January 2017, the inactivity fee will increase to USD 10 per month. Our Terms and Conditions of Trading will, effective 29 January 2017, reflect this change.
- Revised Best Execution Policy
Treating Customers Fairly is central to our corporate culture and ethos.
We have a duty to act honestly, fairly, professionally and in the best interests of our clients when dealing with them.
In relation to order execution, we are required to take all reasonable steps to obtain the best possible result when executing client orders or when transmitting orders to other entities or venues to execute. We understand the best possible result as being the one that delivers the best possible overall price (including costs) within the soonest possible execution timeframe.
We are introducing effective 29 January 2017 a revised Best Execution Policy that reflects amongst others the guidelines set out in the Questions and Answers Document of the ESMA issued on 11 October 2016. Amongst others, the revised Best Execution Policy defines the sources of the prices for the underlying financial instruments, the order types and the nature of our spreads and charges
The Best Execution Policy forms part of Safecap’s Terms and Conditions of trading and other terms and policies that govern your relationship with us. As a pre-requisite of opening and maintaining a trading account with us, you must agree to our Terms and Conditions of Trading. By doing so, you also agree to the terms of this revised Best Execution Policy.
- Revised Conflicts of Interest Policy
In line with our culture and policy of Treating Customers Fairly, we are introducing effective 29 January 2017 a revised Conflicts of Interest Policy that reflects amongst others the guidelines set out in the Questions and Answers Document of the ESMA issued on 11 October 2016.
We explain in this Policy our dealing with you in Principal capacity and how we seek to avoid conflicts of interest, including through the remuneration policies we implement for our staff and associates.
- Introduction of new complaints page on our trading platform
We are committed to addressing your bona fide feedback, queries and complaints speedily and comprehensively. To facilitate this process, we have issued on our Trading Platform a revised Complaints Information page which sets out the process we follow, including the deadlines we are bound by. We also set out therein the alternative options you may follow if you are not satisfied with the way we have handled your query or complaint.
- Key Investor Document
We are introducing a Key Investor Document on our Markets.com website.
This is a document which in plain simple language describes who we are, from which regulators we are supervised, the products we offer and the risks they entail, what is leveraged trading, the other technical features of our products and trading platform, the basis of our relationship and to whom you need to address your enquiries, concerns and complaints. We also set out what you need to determine yourself before you decide to trade with us.
We hope you find this Key Investor Document useful in understanding your relationship and trading with us, confident in our commitment to seek to treat all our clients fairly at all times.
- Revised Terms and Conditions of Trading
Finally, we draw your attention that effective 29 January 2017, our Terms and Conditions of Trading will be revised to reflect all the above as well as a number of other regulatory disclosure requirements such as our disclosure to regulators of the number of profitable and non-profitable clients.
Please consider the above as formal notice of the intended changes to the Terms and Conditions of Trading and let us know if you require us to take any specific action for your trading account. If we do not receive any feedback or advice from you to the contrary by 29 January 2017, we will consider that you have accepted all proposed changes.