Leverage and Margin Policy
CAPITAL COM SV INVESTMENTS LIMITED (the “Company”) is authorized and regulated by the Cyprus Securities and Exchange Commission (“CySEC”) as a Cyprus Investment Firm (License No. 319/17). The Company is authorized to provide investment and ancillary services with regards to specific financial instruments as stated in its CySEC licence.
This Leverage and Margin policy (the “Policy) sets out the leverage and margin levels and procedures applicable to contract for difference (“CFD”) transactions between the Company and its clients. Fair treatment of our clients is one of the pillars our Company is set up on. To achieve fair treatment the current Policy guarantees that the leverage and margin levels applicable by the Company reflect the knowledge and experience of our clients and are not a representation of aggressive leverage policies that often lead to clients suffering huge losses. Moreover, the Policy is designed to match the Company’s risk appetite and risk accepting limits as defined by the Сompany’s Board of Directors.
The Company reserves the right to introduce changes to this Policy from time to time.
2. Legal and Regulatory Framework
This Policy was prepared in accordance with the European Directive 2004/39/EC of 21 April 2004 on Markets in Financial Instruments (MiFID) and the Cyprus Investment Services and Activities and Regulated Markets Law 144(I)/2007 of 2007 (as both are amended from time to time).
3. Risks Involved
Trading CFDs is a form of Leveraged Trading and is highly speculative, involves a significant risk of loss and is not suitable for all investors. CFDs are among the riskiest types of investments and can result in large losses.
Before deciding to trade CFDs a client should carefully consider his/her investment objectives, level of experience and risk appetite. While trading CFDs a client can sustain a partial or full loss of his/her initial investment. Clients should be aware of all the risks associated with trading CFDs and seek advice from an independent financial advisor if they have any doubts.
4.1. “Equity” is the sum of net invested funds plus realized profit & loss plus unrealized profit & loss.
4.2. “Leverage” is the proportion of the Required Margin you have to put upfront to your account to trade to the actual market exposure your will be allowed to undertake while trading CFDs. E.g., a leverage of 1:50, means that for a $1,000 deposit you can open trades worth $50,000 (1000 x 50).
4.3. “Leveraged Trading” means that the client can trade amounts significantly higher than their Required Margin.
4.4. “Required Margin” is the amount of money needed to open and maintain a position. It is derived by:
RM = (Volume * Underlying Instrument Price) / Leverage
The Required Margin fluctuates with the changes in price of the underlying asset.
4.5. “Free Margin” are the funds available for opening new positions.
4.6. “Used Margin” is the sum of Required Margin for all open positions.
4.7. “Margin Level” is a percentage derived by:
ML = Equity / Used Margin
4.8. A "Margin Call" takes place when the client’s Margin Level is at or below 80% and the Company sends its client a notification that he/she needs to either close some positions, or deposit more funds in his/her account to maintain the relevant positions open.
4.9. A "Close Out" takes place when the client's Margin Level is at or below 50%, and the Company decides to exercise its right to liquidate the client's open positions until the client's Margin Level reaches the rate of 80%.
If a sudden market movement causes the Margin Level to drop from above 80% to below 50% the Company may liquidate the client's open positions without sending a notification to the client that his/her Margin Level is at 80%.
5. Margin Ratios
The suggested margin rate per underlying asset depends on the underlying asset’s historical performance, volatility, liquidity, market capitalization and other characteristics. The suggested margin rate per underlying asset will also reflect the Company’s financial strength and risk appetite and general economic climate and factor in the margin requirements imposed by its liquidity providers. Regulatory limitations applicable to margin rates will be taken into account and complied with by the Company at all times.
Based on the factors listed above the Company has produced the following list of underlying asset classes accompanied by their respective margin rates:
Examples of Financial Instruments
Category 1 Shares
APPLE, MICROSOFT, BANK OF AMERICA
Category 2 Shares
AMAZON, TESLA, NETFLIX
Category 3 Shares
GERMANY 30, EU 50
GOLD, SILVER, OIL
2% or 3%
EURUSD, GBPUSD, USDJPY
* These margin rates are subject to change from time to time. The full and current list of financial instruments available for trading through our platform accompanied by their corresponding up-to-date margin rates is available on our mobile app and website.
Important: the Company reserves the right to decrease margin rates or increase them for specific underlying assets in relation to the prevailing market conditions. Where possible, the Company will provide its clients with a 3 business day notice of such changes, to allow the client to take appropriate measures. Changes in margin rates may be caused by:
- expected release of major announcements (elections, referendums);
- periods of low liquidity in the markets (holiday season);
- periods of abnormal market volatility; or
- any other situation which at the sole discretion of the Company justifies a change.
In addition, the Company reserves the right to decrease margin rates or increase them for specific client accounts, if in the Company’s sole opinion the trading style of specific accounts justifies such change. The Company shall inform the client of such change.
6. Maximum Leverage
The default leverage limit for retail clients currently advised by CySEC is 1:50. Depending on the appropriateness level of the client relating to our trading services, the leverage limit can be increased to either 1:100 or 1:200
If under the legal and regulatory requirements of certain foreign jurisdictions that are relevant for the Company’s activities the maximum leverage for affected clients is capped at a level lower than made available, the Company will offer the affected clients the maximum leverage prescribed by the laws and regulation of that foreign jurisdiction (i.e. apply the maximum leverage that is lower than the one allowed by CySEC, but limit such application only to the affected clients).
7. Negative Balance Protection
It is possible for adverse market movements to result in the Company’s clients losing more than their account balance, so that the balance becomes negative. In this case, the Company will bear the negative consequences of such adverse events and any of the clients’ losses will be limited to their then current account balance.
Leverage and Margin Policy V2.0 2017071