On Monday, 30 July 2018, many retail investors awoke to startling news that their trading accounts had insufficient capital; they were in a margin call. In the run-up, most brokers relied on sending their clients a template email, leaving them in the dark and thus needing urgent help to continue trading. Accendo Markets’ clients, however, knew well in advance that this was coming and exactly how much extra would be required to keep their positions open.

The goal of this report is to help those investors who were wrong-footed by the new regulations and to inform them of their options and alternatives.

As of 30 July, the leverage available to retail investors has been limited to between 2:1 and 30:1, depending on the underlying product being traded. In the case of shares, these now all require a 20% initial deposit, equating to leverage of 5:1. The change is a result of new regulations from ESMA (European Securities and Markets Authority), designed to protect individuals from over-leveraging themselves and losing more than they can afford.

It is a positive change that Accendo Markets supports in terms of both ensuring responsible trading and client relationship longevity. Keep in mind that these restrictions do not apply if you meet the criteria for Professional Status (click here).

Margin changes

• For example, to trade Barratt Developments shares, with a value of £10,000, you now require a £2,000 deposit to open and hold the position (£1,000 previously; 2x increase)
• To trade the UK 100, based on £5 per point or 5 units, you now require £1,940 deposit to open and hold the position (£77 previously; 25x increase)
• To trade EUR/GBP based on £5 per point or 50,000 units, you now require £1,470 deposit to open and hold the position (£88 previously; 16x increase)
• To trade Brent Crude Oil based on £5 per point or 665 units, you now require £3,866 deposit to open and hold the position (£291 previously; 13x increase)

As much as the margin requirement for shares has increased, the magnitude of the increase is, in fact, the smallest across all the above asset classes. Those still looking to generate the same returns from Indices, FX and/or Commodities have a choice between either scaling up their trading proportionately, requiring substantially more deposit and thus potentially involving more risk, or looking at alternatives.

The margin requirement for Shares may now be higher, but the increase is small in comparison to other products. It also means a bigger buffer, offering investors more built-in breathing room in case the share price goes against them.

Finding the balance

Because margin requirements on different CFD products have changed, many retail investors are asking their brokers urgent questions about which underlying products could offer them more tradable opportunities.

The following report takes an in-depth look at the relative benefits and limitations of trading/investing in various CFDs asset classes.

If you require personalised help with your investments, you can contact Accendo Markets’ professional brokers and sign up to have our research sent directly to your inbox.