Information about ESMA’s margin close-out proposal
In addition to the leverage restrictions detailed in our previous email, ESMA is suggesting a 50% margin close-out rule on a position-by-position basis. This is a drastic change to the current system where we look at positions together at ‘account level’, and means traders will be in danger of having positions closed out early – even if their overall strategy is in profit.
So if any single position runs a loss to half the initial margin, that position will have to be closed. For example if the initial margin to open a Germany 30 trade was €2000, that position would have to be closed by IG when there was a loss of €1000 (50% of €2000), irrespective of profits on other positions. IG feels this is not sensible.
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