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Margin size under the new rules of the FCA

Good afternoon, Darwinex.
Soon, limits on the size of the shoulder / margin will be introduced.

  1. To adjust the risks in my trading systems, I need to know the specific size of the maximum shoulder / margin for each instrument. Please make a table where it will be indicated:
  • Name of the instrument (for example, EURUSD);
  • Current max. size of the shoulder / margin;
  • Max. size of the shoulder / margin after the introduction of restrictions of the FCA.
  1. Please clarify the following situation. Under the new rules, the shoulder restriction is set to 1:30 for majors. I open 3 positions: 1 lot EURUSD, 1 lot GBPUSD, 1 lot USDJPY. The total shoulder for these positions = 25. All positions go into negative. And the current actually used shoulder becomes 1:31. What will the broker do?
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Hi @Sergey5,

Thanks for your question.

We’ll post the info on our website when ESMA makes their final decision public, meanwhile I’d suggest reading: https://blog.darwinex.com/esma-product-intervention/

As you may know, there is (and will be) a 50% stop out level, meaning that at margin levels of 50%, we shall automatically begin closing positions at market price, starting from the most unprofitable one.

I hope this helps!

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Why not setting the stop-out margin at 100% like GlobalPrime does? Customer loses will be greatly reduced

What is th current CFD and Currency Leverage?
I Don’t find the numbers.

Some indications are needed in advance to gradually reduce the risk profile if necessary.
The optimal timespan to change risk profile is 2-3 months.

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Thanks for the suggestion, @Aimak, it’s the regulator who has set the 50% margin level. In any case, you’d be surprised by how many people accused us of being scammers because of stopping there losses at 50%, so I don’t want to imagine how people would react if we closed at 100%!

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I‘m strictly against a change of the stopout margin, which would guarantee losses if LPs exceed their market moves.
@ignacio
My question above is not answered yet. As far as I remember we have 1:100 for currencies, 1:5 for NDX, 1:25 for WS30 and ESX.
Is that correct and will there be a change but on currency pairs?

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Apologies , @Journalist, you can find the required margins here: https://www.darwinex.com/executionconditions

I hope the following pic helps as a guide:

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Thank you. As the leverage is currently calculated against the future trading an index with a multiplier, that can have high impact on strategies if the funds must raise on the trading account or the market exposure must decrease.

That could decrease the VaR and boost the Darwin’s DD and profit.

Are the same leverage limits used for investor accounts and did Darwinex analyse the effects?

example:
NDX is traded currently with 2 % which will raise to 5%. (Major Indices, currency pairs can be worse).
Currently I can trade 1 lot NDX with a 2k account and have about 700 bucks free margin, with the new rules 1 have to pay at least 500 bucks more for trading 1 lot and have no free margin. Currently the 50% margin call stop out will close my position with 650 bucks left, in future it will be closed with 1250 bucks left. The traders loss currently is 100 more than with the new ESMA rules. That’s what ESMA calls investor protection :frowning: , that the LP got 400 bucks more for the margin call stop out and the traders has to risk more money.

So wouldn’t it make sense to offer the trader a 30% stop out level on demand on his own responsibility?
Please correct my example if it is wrong.

As per ESMA regulations, 50% stop out is mandatory in case of retail traders :frowning:

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Thx, That’s what I feared, ESMA makes traders losing easier more money if they don’t calculate the new rules very exactly.

The theory is quite clear, what we need is to know the max risk profile to avoid being “margin called”, in terms of VaR or D-Leverage.
I remember my first account was created with a leverage of x20 , so no problems with new rules.

Than it has been converted to “standard leverage” and percent margin.
https://blog.darwinex.com/new-margin-requirements/
This is more flexible for the broker that can increase margins for events but causes uncertainty in this case.

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Yes, I think a VaR of 99 % is not possible with the new rules of ESMA. That will effect the one or the other Darwin.

@ignacio
Did Darwinex make an analysis which max. VaR is possible for which asset class (currency pairs, indices, commodities etc.) ?
Might be necessary for traders trading with high VaR so that they can add funds to their trading account in time (and hopefully Sanabell will be fast with this) .
Worst case could be closing positions with a margin call stop out immediately when the new margin rates are implemented.

When will the ESMA rules be effective at Darwinex?
I have read that some of the margin requirements have to be effective before end of this month.

My question above for the Max. Possible VaR with the new margin is left without answers , but I still think some traders should be aware to avoid margin calls.

I suppose that once the new regulation becomes effective a transition period will be allowed to ensure that all traders close their trades or lower their leverage in advance

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Yes this is the sense of this dicussion :slight_smile:
To know future conditions in advance, possibly with some examples on risk profiles close to the limit.

It is quite clear that 50-100% VaR won’t be possible anymore.
What about 5 , 10 , 15 , 20% VaR ?
These are the risk profiles of 95% of profitable traders.

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On the lower VaR % it is possible that you have no free margin and the strategy can be effected if it is impossible to place a new trade as usual.

If you add funds to the trading account to avoid this, VaR is decreased and can boost DD and profit.

That’s why I am trying to insist on an answer. :wink:

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Exact!
For example a proper transition from 40% var to 10% requires 3 months.

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This is going to be a problem for me, since i am one of the 5%, with arround 30-40% VAR :frowning:

Even if i make a smooth transition, Rs score will suffer if i have to go down to ~20 at least.

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A follow up question would be whether a minimum value of VAR must be implemented to avoid a margin call on investor accounts with the new requirements.

What happens to an investor account if the VaR if the only Darwin invested has a VaR of 0.5 % and it is fully invested in this Darwin? There was a discussion about a cap of the replication factor months ago but I don’t find it.