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Lever for Polish traders limited to 1: 25? The idea of ​​the government is very real
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Lever for Polish traders limited to 1: 25? The idea of ​​the government is very real

created Paweł MosionekJuly 13 2017

Yes, it's not a joke. A draft amendment to the Act has appeared, which assumes a reduction of the maximum financial leverage to 1: 25 for people investing in the Forex market on the so-called internet platforms. This means that we would be able to get 4 more capital into the same transactions. The project does not imply any exceptions or exceptions. But that's not the end of ideas.

Forex on dating from 2 for years

For nearly two years now the Forex market has been experiencing a gradual phenomenon of the so-called tightening the adjustment screw. The first key changes took place in July 2015, when it was limitation introduced to 1: 100 for Polish residents. Back then, there were many more doubts - it was not known whether the changes would only apply to Polish brokerage houses or to all brokers. It quickly became clear that the changes will apply to all brokers in the EU.

Another key change was introduction of a number of guidelines for industry institutions, which entered into force on September 30, 2016. The changes included both the trading and marketing spheres. They were also intended to increase brokers' transparency. This time the changes are to be even more restrictive.

Lever firmly down

The project envisages raising the requirements regarding margins for Forex transactions from 1% to 4%. It means reduction of the lever from 1: 100 to 1: 25. In other words, currently we have to freeze the capital of 1.0 EUR for 1000 lotto EUR / USD, or about PLN 4230. After the changes, this requirement would increase to EUR 4000, i.e. almost 17 000 PLN. According to the government, this is to minimize the risk of a rapid loss of capital, referring to the NIK report, Polish traders have lost over PLN 2 billion in two years. This report also says that 80% of traders are losing, though quarterly reports of Polish brokerage houses show that we are dealing with a value oscillating around 65%.
The bill refers to the reduction of leverage to 1: 25 in other countries of the Community, although in fact such a decision was made only in Turkey.

Escape abroad? Nothing of that.

This is not the end of changes. The amendment also provides for the addition of new powers to the KNF in the form of the possibility of requesting from the provider of telecommunications services the provision of information constituting a telecommunications secret. What is more, the Commission will also obtain preventive instruments in connection with the public warning list. KNF will maintain a register of websites that will be subject to unconditional blocking by Internet providers.
What could this mean in practice? At the moment, Polish residents have the option to open an account with a leverage greater than 1: 100, e.g. in Australia or Asia. It can be assumed that in the event that a foreign company that fails to comply with the applicable regulations and accepts Polish residents by offering them a leverage greater than that assumed by the domestic government, it will risk being entered on the list of warnings. This, in turn, may involve the risk of blocking its website and cutting it off from the entire market in Poland.

Forex like gambling?

From 1 on July, 2017, the amendment to the Gambling Act came into force. This means that banks have received new responsibilities regarding actions to prevent illegal gambling. The use of payment cards or transfers to institutions associated with illegal gambling is not allowed. At this stage, there are no plans to implement similar solutions for the Forex industry. But did two years ago anyone suspect the possibility of limiting the leverage to 1: 25?
The draft act also expanded Art. 178. It provides for the possibility of imposing a financial penalty not only of PLN 5 million for offering illegal instruments, but also liability for losses of third parties and a fine of up to PLN 10 million. The record applies to all market participants, that is also training companies or suppliers of "signals". Thus, the changes can hit not only traders and brokers but also side institutions.

The consultations will last until the 27 in July

Do 27 July this year external consultations will take place regarding planned changes, although some representatives of the industry claim that the door handle has already been taken and the bill will be unchanged. The final decisions can be expected at the beginning of September after the holiday break in the Sejm.
So, are we going to face further dramatic changes on the Polish Forex market? In addition to huge liquidity, low fees and the possibility of concluding short transactions, it is precisely leverage that is a feature that is highly sought after by investors. Its limitation may be related not only to a decrease in interest but also to an increase in transaction costs among Polish brokerage houses, which in most cases only operate on the domestic market. This, on the other hand, may lead to a decisive step back in the quality of services provided and the reduction of the offer. Will this really happen?
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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.