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What is ESMA?

ESMA is an independent EU Authority that contributes to safeguarding the stability of the European Union’s financial system by enhancing the protection of investors and promoting stable and orderly financial markets.

What are the new ESMA product intervention measures?

ESMA has agreed on measures in relation to CFDs. The measures restrict the marketing, distribution or sale of CFDs to retail investors, by providing the following protections:

  • Leverage limits on the opening of a position between 30:1 and 2:1, which vary according to the volatility of the underlying asset:
    • 30:1 for major currency pairs;
    • 20:1 for non-major currency pairs, gold and major equity indices;
    • 10:1 for commodities other than gold and non-major equity indices;
    • 5:1 for individual equities and any underlying not otherwise mentioned;
    • 2:1 for cryptocurrencies;
  • A margin close-out rule on a per account basis;
  • A negative balance protection on a per account basis;
  • A prohibition on benefits and incentivising trading;
  • A standardised risk warning.

Do the new ESMA measures only apply to clients living in the EU?

The ESMA product intervention measures apply to all clients trading with Tickmill Europe Ltd, irrespective of their location.

Are the new measures permanent?

According to ESMA, these measures will apply for at least three months, at which point they may be renewed.

Who can be a Professional Client?

A Professional Client can be either ’by default’ or ’elective’:

  • By default Professional Client:
    • A client required to be authorised or regulated to operate in the financial markets, including but not limited to credit institutions, investment firms and insurance companies
  • A large undertaking meeting of two of the following size requirements on a company basis:
    • A balance sheet total of 20,000,000 EUR or more;
    • A net turnover of 40,000,000 EUR or more;
    • Own funds of 2,000,000 EUR or more;
  • A national or regional government, including a public body that manages public debt, central banks, international or supranational institutions.
  • An institutional investor whose main activity is to invest in financial instruments.
  • A large undertaking, including a partnership, a body corporate or an unincorporated association, which meet the relevant criteria.
  • Elective Professional Client: A client must meet the requirements set by CySEC.
    • A client must pass a “Qualitative test”, where we must assess their knowledge, experience and expertise with reference to the nature of the transactions or services envisaged, to ensure that they are capable of making their own investment decisions.
  • A client must also complete a “Quantitative test” and satisfy 2 of the following criteria, where applicable:
    • The client has carried out transactions in significant size and averaged a frequency of over 10 trades per quarter on the relevant market over the previous 4 quarters;
    • The client has an investment portfolio and cash investments of over 500,000 EUR in value;
    • The client is employed or had been employed in the financial sector for over a year in a professional position that requires knowledge of the transactions or services envisaged.

How can I become a Professional Client?

A client who wishes to be reclassified must meet the minimum criteria to be eligible to become an elective Professional Client. Clients can contact the Compliance Department directly via email or telephone.

What is the new margin close-out rule and what are the practical implications of it?

  • The margin close-out rule standardises the percentage of margin at which CFD providers are required to close out a CFD or multiple CFD positions.
  • The margin close-out has been set at 50% to ensure that investors’ margin is not eroded close to zero.
  • Specifically, if the total margin in an account falls more than 50% of the amount of the initial margin required in respect of the open CFD position, the provider must close one or more of the CFD positions.
  • The margin close-out rule does not prescribe which positions must be closed out or in what order.

Will the leverage change on the demo account to 1:30?

The demo account will simulate a live trading environment.

What is negative balance protection?

  • The negative balance protection limits the maximum losses that a retail investor could have. It is designed as a backstop for cases when margin close-out does not work effectively as a result of a very sudden price movement.
  • By introducing negative balance protection per account, the investor can never lose more than the total sum invested for trading CFDs. There can be no residual loss or obligation to provide additional funds beyond those in the investor’s CFD trading account.

What are the minimum requirements to become a Professional Client?

A Professional Client must possess the relevant experience, knowledge and expertise to be able to make their own investment decisions and properly assess the risks involved.

Please refer to the criteria set out above, under ’Elective Professional Client’.

Will Tickmill Europe Ltd offer credit allocations that will increase leverage?

Tickmill does not plan to offer credit allocations that will effectively increase the leverage limit.

What does a leverage limit imply?

The leverage limits imposed on CFDs set the maximum leverage that providers can offer you opening a CFD position.

In order to comply with ESMA regulations, Tickmill will be required to reduce the leverage on many of its products from 1:300 to 1:30 for Retail Clients. So, whereas the requirement on a 100,000 EUR position will currently require a deposit of just 300 EUR, this will increase to 3,000 EUR for Retail Clients.

With lower leverage limits investors are protected from certain risks.

What level of professional experience do I need to have to qualify as a Professional Client?

The minimum professional experience requirement is to have worked in an industry and a role that required a good understanding of CFDs and the foreign exchange market for at least one year.

What can I use in my investment portfolio?

You can use bank statements, share certificates and SIPS (provided it is not a company pension). This list is not exhaustive.

We will not accept company pensions, physical commodities and fixed assets (including properties and vehicles).

What evidence will a client be asked to submit to reclassify as a Professional Client?

  • Evidence of trading activity showing approximately 40 trades of a significant size during the past year.
  • Any documentation that shows that the client has worked in the industry in the relevant financial sector for over a year in a professional position requiring knowledge of the transactions or services envisaged.
  • Bank statements, share certificates, broker accounts, etc. that evidence 500,000 EUR or more in investments.

Does my professional qualification guarantee I will become a Professional Client?

No. A relevant qualification alone will not guarantee that someone will become a Professional Client. However, it will be looked upon favourably.

Will my funds still be segregated if I become a Professional Client?

Yes. We will continue to segregate all elective Professional Client funds.

Once I become a Professional Client, can I revert to Retail Client status if I wish?

Yes – clients have the right to be reclassified at any time. Please email Client Support.

What can I do if I fail to meet the minimum criteria to reclassify as a Professional Client?

Our Retail Clients will enjoy the maximum protection available under CySEC rules. If you do not meet the minimum requirements, then you will continue to be classified as a Retail Client. Kindly note that you should NOT provide false information in order to qualify as a Professional Client.

Do the new ESMA measures apply to companies as well?

Yes, they do. The measures apply to Retail Clients, whether they are individuals or corporations.

Will my funds still be protected if I become a Professional Client?

Your funds will not be covered by the Investors Compensation Fund (ICF) if you choose to become an elective Professional Client.

What are the practical implications of becoming a Professional Client?

As a Professional Client, you will not have the following protections afforded to Retail Clients under CySEC:

  • FOS – If you are an elective Professional Client who is not defined as a ‘consumer’, you will not have access to the Financial Ombudsman Service (FOS).
  • No leverage restrictions – You might be exposed to higher leverages that can amplify your losses.
  • Investors Compensation Fund (ICF) – Professional Clients under Tickmill Europe Ltd (CySEC regulated) are not entitled to a compensation by the ICF. These are listed in the Loss of Protection section in the Client Area that you need to read and accept before your application is submitted. https://secure.tickmill.eu/users/login

Can I have a professional account and a retail account at the same time?

As Tickmill only offers CFDs, a client can be a Retail or a Professional Client. Tickmill Europe Ltd will not be offering a retail and a professional account at the same time. You will be classified either as a Professional or a Retail Client.

Do I get negative balance protection as an elective Professional Client?

Yes, professional clients will enjoy negative balance protection.

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Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with Tickmill Europe Ltd. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.