Darwinex implements new ESMA-compliant risk management measures
Darwinex implements new ESMA-compliant risk management measures
Darwinex, a leading online trading platform, has announced the implementation of new regulatory measures to manage risk exposure in DARWIN portfolios, in accordance with the European Securities and Markets Authority (ESMA) guidelines. These changes are designed to ensure that retail clients do not exceed permissible risk levels, thereby minimizing the possibility of incurring losses greater than their deposits.
The new regulations require Darwinex to monitor the exposure of DARWIN portfolios based on the underlying assets held, such as indices, stocks, commodities, or currencies, rather than the amount invested in the DARWINs themselves. This approach aims to prevent excessive risk-taking by ensuring that the exposure remains within the limits set by ESMA, relative to the total funds available in the portfolio.
Darwinex emphasizes that the vast majority of investors will not be affected by these new measures, as it is highly unlikely for any investor to reach the regulated risk thresholds. However, investors who employ leverage of three times or greater and concentrate their investments in one or two DARWINs may approach these limits. For these investors, it is essential to be aware of their portfolio's exposure and manage it accordingly.
To protect the intellectual property of DARWIN providers, Darwinex will not disclose the specific underlying assets to investors. However, the platform will display the level of open exposure in these assets, ensuring that exposure levels remain compliant with the regulation.
The implementation of this regulation will occur in two phases. The first phase, already in effect, allows clients to view their margin percentage in the portfolio header. The platform will restrict purchases in DARWINs and withdrawals from the portfolio if the margin percentage falls below 100%. Additionally, while investments will not be automatically closed if the margin percentage drops below 50% during this phase, clients will receive a notification when the margin falls below 100%, allowing them time to take action.
The second phase, anticipated to launch within a month, will involve the automatic sale of DARWINs from portfolios if the margin percentage drops below 50%. This measure is intended to further protect clients from exceeding acceptable risk levels.
For investors who find their margin percentage nearing or below 100%, Darwinex recommends several strategies. These include depositing more capital to increase the margin percentage, redistributing investments across more DARWINs to reduce concentrated risk, or proportionally selling all investments in the portfolio to lower exposure levels.
Darwinex advises investors to take these new regulations seriously and adjust their portfolios as needed to stay within the regulatory guidelines. By doing so, they can continue to trade confidently while maintaining compliance with ESMA’s risk management standards.
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