Following IG Group Holdings plc (LON:IGG) and Plus500 Ltd (LON:PLUS)’s recent reactions, Copenhagen based multi asset broker Saxo Bank has also spoken, ‘strongly’ welcoming ESMA’s leverage restrictions.
The measures include caps on leverage which Saxo Bank considers fair and proportionate. Saxo Bank expects these measures to be positive for clients and result in a more level playing field among EU providers offering margin trading, which will in turn move the competitive focus away from leverage and towards the quality of platform, price, product and service.
Kim Fournais, Saxo Bank
Commenting on ESMA’s measures, Kim Fournais, founder and CEO, Saxo Bank, commented:
“Saxo strongly welcomes and supports the measures set forth by ESMA and believes that consistent, harmonised regulation at a European level will be positive for clients and the industry as a whole. Through these measures, ESMA is creating better alignment between leverage levels and market conditions which is very important and we find the proposed caps on leverage fair and proportionate.
We have made a clear strategic decision not to compete on high leverage which puts us in a good position to maintain and grow our business in this new regulatory environment.
CFDs and FX instruments have a number of uses for traders, such as allowing them to trade the full global macro cycle and hedge their market exposure in a flexible and efficient way. However, with excessive leverage, the risks of trading these products can outweigh the benefits. It is important to note that this is a leverage problem – not a product problem. Responsible caps on leverage are therefore key to consumer protection.
Our approach and business model clearly show that running a profitable business and being a responsible market participant are not mutually exclusive. For the benefit of its long-term survival, the industry should welcome the move away from competition on leverage and embrace competition on quality of platform, price, product and service”
Some argue that more prudent consumer protection will lead to increased activity from unlicensed providers from outside of the EU. Such activities should be the remit of the police and relevant authorities. This is however an entirely separate issue and not in, our opinion, a valid argument against firm and fair regulation” added Fournais.
As one of the first signatories of the FX Global Code of Conduct in 2017, Saxo Bank also decided to publish an Enhanced Disclosure and withdraw from the UK CFD and Association.