Darwinex Margin Regulation Changes aim to manage risk and ensure compliance with ESMA guidelines for effective portfolio management.
Darwinex Margin Regulation Changes aim to manage risk and ensure compliance with ESMA guidelines for effective portfolio management.
Darwinex has issued a new notification to clients about margin calculations for investor portfolios, aligning with European Securities and Markets Authority (ESMA) regulations. These Darwinex Margin Regulation Changes aim to prevent retail clients from taking on excessive risk and ensure they do not lose more than their deposited funds.
Under these regulations, Darwinex must regulate the exposure of DARWIN portfolios based on the underlying assets, such as indices, stocks, commodities, or currencies, rather than the total amount invested in DARWINs. To safeguard the intellectual property of DARWIN providers, Darwinex will not disclose the specific underlying assets but will manage exposure levels to comply with regulatory limits.
Regulations require brokers to maintain a minimum amount of available capital for specific asset exposures. For instance, opening a €10,000 position in EUR/USD necessitates at least €333.33 in the account. The rules stipulate that if adding a new position would reduce the margin percentage below 100%, the broker must prevent the transaction. If the margin percentage falls below 50%, typically due to account withdrawals or losses, the broker must close some positions to restore the margin above 50%.
Darwinex is implementing these regulations in two phases. The first phase, already active, includes several key changes: clients can now view their margin percentage in the portfolio header, and the system will restrict purchases and withdrawals if the margin percentage is below 100%. Additionally, if the margin percentage drops below 100% after a transaction, the system will limit further investments or withdrawals.
Although the system will not automatically close investments when the margin percentage falls below 50% in this phase, Darwinex will notify clients when margin levels dip below 100%. This precautionary measure gives clients time to adjust their portfolios before the second phase enforces automatic sales of DARWINs if they do not manage margin levels adequately. This second phase is expected to be introduced within a month.
To avoid margin issues, they advise clients to deposit additional funds, diversify investments among multiple DARWINs, or proportionally sell holdings to enhance the margin percentage. They recommend investing in at least four DARWINs to maintain a stable margin percentage for those using leverage levels of 3 or 4.
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