BOARD
MiFID 2

Gearing up for MiFID 2: our preparations and plea to ESMA

19 September 2017

MifiD 2 – a pan-european piece of financial legislation applies from January 3rd, 2018.

10 years in the making, MifiD 2 builds on its predecessor, “to improve the functioning of financial markets, making them more efficient, resilient and transparent.”

Whilst the overall scope of MiFID 2 is way beyond our scope …

MiFID 2 & Retail Brokerage

But does it affect the retail brokerage industry?

Quite a lot. ESMA, the Pan-european regulator behind MiFID2, has its eyes set on CFDs – intervening using rare legislative prerogatives reserved for “high priority” situations.

Why is that? Because retail trading has grown a lot (the trader movement is strong!). Unfortunately, it’s done so with teething problems that need fixing, pronto. In its statement, ESMA announces regime changes combining (and hopefully harmonising) the various measures introduced by national regulators, including:

  1. Leverage limits,
  2. Guaranteed limits on client losses, and / or
  3. Restrictions on the marketing and distribution of these products.

National strategies so far – our take

If we were in ESMA’s shoes, we’d make retail OTC trading “efficient, resilient and transparent” by forcing CFDs on Exchange, because this would tame the conflict of interest between retail traders and market makers. Without conflict, who would want retail traders blowing up? What would be the point of leverage limits, guaranteed stop-losses or marketing restrictions? (Could this be why IG are working on their own MTF?).

If you want more insight on why, in our view, on Exchange is the only way:

Alas, national regulators haven’t suggested on Exchange for now… so we hope whatever ESMA comes up with overcomes the limitations of:

  1. FCA: Leverage limits (NB the FCA has since delayed policy to follow ESMA)
  2. BaFin: Guaranteed limits on client losses as introduced in Germany…

MiFID 2 – the Darwinex way

In any case, we’re luckily not in ESMA’s shoes (not an easy job!). We’re in our own – and there’s plenty we can – and will – do in the meantime.

Since launching Darwinex broker 3 years ago, we’ve NEVER traded against customers (and NEVER will). Instead, we invest in them. Slowly but surely… the likes of NTI prove that listing independent traders creates an asset, and that investor leverage is the sustainable business model.

And yet, on Exchange or off Exchange, more and more people actively invest their savings. Which unfortunately also means too many gamble away more than they can afford. The problem is: too many quit before learning how to do it. Because that’s bad (for them and for us), we’re re-vamping on-boarding procedures for even more alignment and transparency.

Without disclosing methodology & parameters (this could incentivise people to “game” the system against their own best interest), available leverage for users will depend on:

  1. Proven or proveable experience/training when trading with leverage
  2. Solvency – because no-one should risk capital they can’t afford to lose

MiFID 2 – what it means in practice

NB: all users will be allowed to purchase DARWINs – within their stated risk appetite. This is because DARWINs are comparatively low leverage (rarely more than 5:1)

We will segment the Trading user base using both pieces of information, and transition from:

  1. Inappropriate -> the aspiring traders’ gaps in either or both criteria are too large. We won’t accept his trades until he’s ready (watch out for more news in the educational space)
  2. On transit -> it’s appropriate for the user to trade, but we will restrict the leverage he can deploy
  3. Unlocked -> user has acquired enough experience. We will offer him/her all the leverage available to customers at any given time

We will disclose our internal categorisation to customers so they know where they are in their evolution from “novice” to “maximum” leverage.

In addition to the above segmentation, we will apply two further controls:

  1. For investors: from day 1, the risk management engine tracks Equity at Risk (EaR) for every investor portfolio. Investors can’t buy more exposure than their maximum risk threshold at any point in time – investors can only sell once they reach the maximum threshold
  2. For all customers: we will track customers’ overall P&L (for trading and investing), informing them about it. We will also warn when the threshold is exceeded. And we may withdraw permission to trade if we feel it’s inappropriate for him/her to continue trading

Last, but not least, the restrictions apply to new customers only.

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apalancamiento esma

DarwinIA introduces four additonal excluding criteria

12 August 2020

Darwinex accompanies the new D-Score with modifications to the criteria for participating in DarwinIA. From the September 2020 edition, 3 additional excluding criteria will be added.

As announced in the article about the new D-Score, Darwinex accompanies the new D-Score with modifications to the criteria for participating in DarwinIA. From the September 2020 edition, the following 4 restrictions will be added:

Mc < 3. A DARWIN won’t be ranked on the DarwinIA leaderboard while it’s Market correlation score is lower than 3.
Rs < 3. A DARWIN won’t be ranked on the DarwinIA leaderboard while its Risk stability score is lower than 3.
Monthly return < 0%. A DARWIN won’t be ranked on the DarwinIA leaderboard while its monthly return is negative.

DarwinIA allocation > € 500,000. A DARWIN won’t be ranked on the DarwinIA leaderboard while its accumulated DarwinIA allocation is higher than € 500,000.

Visit Darwinex Docs – DarwinIA to check out all excluding factors.

Trading Schedule for the US Independence Day on 3rd July 2020

30 June 2020

Please note the amended Darwinex trading hours for the upcoming US Independence Day on 3 July 2020.

Please note the amended Darwinex trading hours for the upcoming US Independence Day on 3 July 2020. All times are in UK (BST) time.

FX Friday 3rd July
All FX Instruments 22:04:01 Thu – 21:55:00 Fri
DARWINs 22:05:00 Thu – 21:55:00 Fri
Commodities Friday 3rd July
Gold *23:01:00 Thu – 17:44 Fri 
Silver *23:00:01 Thu – 17:59:50 Fri 
US Crude *23:00:01 Thu – 17:44 Fri 
US Natural Gas *23:00:01 Thu – 17:44 Fri 
Indices Friday 3rd July
AUS200 23:00 Thu – 22:00 Fri
STOXX50E 23:00 Thu – 22:00 Fri
FCHI40 23:00 Thu – 22:00 Fri
GDAXI 07:00 – 21:00
J225 *23:00 Thu – 18:00 Fri 
SPA35 07:00 – 19:00
UK100 23:00 Thu – 22:00 Fri
SPX500 *23:00 Thu – 18:00 Fri
NDX *23:00 Thu – 18:00 Fri 
WS30 *23:00 Thu – 18:00 Fri
Stocks Friday 3rd July
All US stocks CLOSED
 
Crypto Friday 3rd July
All Crypto Instruments 22:05 Wed – 22:00 Thu

*Amended trading hours.

The DARWIN Exchange will remain open even if the underlying assets’ market is closed. Learn about standard procedure when you buy/sell a DARWIN whose underlying asset market is closed: What happens if you want to buy/sell a DARWIN which has underlying trades open with different opening/closing times?

As always, at info@darwinex.com we’ll be happy to assist you!

apalancamiento esma

Move of DarwinIA allocations to new risk DARWINs

26 June 2020

Next Monday  29 June 2020 13:00 we will move DarwinIA allocations from the DARWINs of VaR 10% to those of VaR 6.5%.

Next Monday  29 June 2020 13:00 we will move DarwinIA allocations from the DARWINs of VaR 10% to those of VaR 6.5%.

For this move, it’s necessary to take into account the PnL of the allocation. That is, if a DARWIN of VaR 10% had an allocation of 20,000 and PnL of 1,000, what it will have after the migration to VaR 6.5% will be

(20000 + 1000) * 10/6.5

If it were a loss instead of a gain, it would be subtracted.

On July 1st the new DarwinIA prizes will be allocated to the 6.5% VaR DARWINs.

Upcoming Holiday in Australia

4 June 2020

Please be aware that there is a public holiday in Australia on 8 June. Please kindly note that during this time spreads may be wider and liquidity may be thinner. Bank holidays may also give rise to changes to the applicable swap rates. Here are the amended Darwinex trading hours for this day. All times are […]

Please be aware that there is a public holiday in Australia on 8 June. Please kindly note that during this time spreads may be wider and liquidity may be thinner. Bank holidays may also give rise to changes to the applicable swap rates.

Here are the amended Darwinex trading hours for this day. All times are in UK (BST) time.

Indices  Monday 8th June 2020
AUS200 08:10 – 22:00

 

The rest of the assets will trade according to their usual trading time.

 

apalancamiento esma

Platform in Maintenance Mode on May 30-31

29 May 2020

For the rolling out of the changes announced earlier this week, the entire Darwinex platform will be switched to maintenance mode including darwinex.com, mobile apps, FTP service and DARWIN API.

For the rolling out of the changes announced earlier this week, the entire Darwinex platform will be switched to maintenance mode including darwinex.com, mobile apps, FTP service and DARWIN API.

If everything goes as planned, the new DARWINs will be born by the end of the weekend!

Upcoming Holiday In New Zealand Resulting In The Possibility Of Wider Spread

27 May 2020

Please be aware that there is a public holiday in New Zealand on Monday, June 1st during which spreads may be wider and liquidity may be thinner. For any questions, reach out to info@darwinex.com.

Please be aware that there is a public holiday in New Zealand on Monday, June 1st during which spreads may be wider and liquidity may be thinner. For any questions, reach out to info@darwinex.com.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. -- % of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.