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Become a professional client with the left 1: 500 [Speak out the reader]
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Become a professional client with the left 1: 500 [Speak out the reader]

created Paweł MosionekJune 4 2018

The upcoming regulation of ESMA is something that most retail traders spend their time sleeping. By the time we did not know the date of entry into force of the amendments, some hoped it would never happen. But now we've started the countdown. The new rules will be in force from 1 August 2018.. Will the status of a "professional client" be the recipe for this?

Paradoxically, in the assumption of the authors of changes, the new regulations are to contribute to the increase of trade security and, consequently, to improve the statistics of those earning / losing on the Forex / CFD market. But in practice, we feel as if someone, offering us increased security at the same time he was cutting our wings.

At the moment, the published announcements show that the changes are to be temporary for a period of 3 months. But frankly speaking, it seems extremely unlikely to ESMA did not make use of the extension option.

The way out of this situation may be migration to a broker from outside the EU (eg Switzerland, Australia), or changing the classification to the so-called "Professional client" (we have described these issues in more detail in the article Forex lever down to 1: 30 and less. Reflections and alternatives for traders), however, even official brokers from those countries should not offer EU residents more leverage than ESMA permits. The 2 number option is a gateway for people who do not want to change their current broker. But here too the regulator puts certain conditions.


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One of our readers contacted us with the intention of sharing their own experiences. Below we publish the content of the message.

The reader's statement

A friend of mine works in the compliance department (legal department - editorial note) of one of the largest brokers in the UK. Recently, I had a rather interesting, and of course informal, conversation with him about reclassification to a professional client, and he told me some interesting things.

1. You can declare that you have 500. EUR of investment or capital, and no one will control it in the Tax Office, because first of all, they are not obliged to do so; secondly, they are not entitled to request such information from the Office. All requests for a professional client are confidential. If the data declaration coincides with what you gave in the survey when setting up the account with your deposit is relatively high, there is a high probability that they will not require confirmations from you. If you have given a lot of earnings or savings in your survey, and you have little money in your account, they may ask.

2. The easiest way to meet the turnover criterion is - if you have an account with a broker for up to several months and you make a reasonable trade on it, they won't want any additional evidence. Again - if you play microlight you will likely be asked to prove your previous spin.

3. Declaration of experience - here is the biggest field to show off. If you declare that you have at least 1 year of experience in the sector, there is a chance it will pass. If you are under 20, a reasonable deposit and turnover of course. FCA does not require brokers to verify this statement, nor do they have the tools to do so. You can give the name of any financial institution and it will probably pass. Some brokers are so creative that if the client makes sense, they even count the experience of investing on FX under this paragraph.

I personally applied for a professional client with three brokers and I passed all the qualifications without any problems.

JW

A professional client is your choice

Is it really that simple? Yes and no. According to the reader's comments, traders with little experience and capital in advance are disqualified from applying for "PRO" status. But wasn't that the intention, too, to protect unsuspecting traders from the dangers?

You can argue whether the requirements are at a sufficiently high level, especially those relating to the volume and property. In the end, the wealth of the society between individual EU countries can be very diverse and the requirements are standardized.

Another important issue is the method of verifying all information we provide, which in reality should not go beyond the truth.

One should also bear in mind the consequences of switching to "professionalism". ESMA decided to introduce mandatory negative balance protection for all retailers. However, this protection is not obligatory in the case of professional clients. So we are faced with a kind of dilemma - greater security or greater opportunities?

Each of us must answer the question of what is more important to him.

It is worth noting that the broker can voluntarily offer protection against negative balance also to professional clients. Such a step was decided by, among others British Tickmill broker.
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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the ForexClub.pl website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.