Breaking: Poland Defies ESMA Enables 100:1 Leverage

Retail investors will be able to trade forex, major indices, and gold with higher leverage

The Polish Financial Supervision Authority, the KNF, just announced that it is implementing additional requirements on offering CFDs to retail investors. The regulator unanimously decided that its product intervention measures will ignore criticism from the pan-European financial industry supervisor, the European Securities Markets Authority (ESMA).

The move marks yet another case of Poland defying EU-mandated norms. The KNF has been particularly worried about retail investors fleeing offshore and has a well-justified view on how to arrest this trend.

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The commonly accepted ESMA-mandated 30:1 leverage has made a number of retail traders move funds to less-prominent regulatory jurisdictions offshore. With the adoption of an ‘experienced trader’ category, the KNF aims to continue ensuring fair markets for retail customers.

While the ESMA’s opinion yesterday was supported by the French AMF, BaFIN, and the FCA, its justification was merely that there is no proof that experienced clients are losing less money. The focus of the KNF is rather on ensuring that the traders are getting an adequate service and that their deposits are protected.

Assets Included in 100:1 Leverage Category

An experienced retail customer will be able to trade CFDs with a higher level of leverage only in select assets. The list includes all forex pairs, major stock indices, and gold. The KNF specified the following stock market benchmarks as major: FTSE 100, CAC 40, DAX30, DJIA, S&P 500, NASDAQ Composite, NASDAQ 100, Nikkei 225, ASX 200, and EURO STOXX 50.

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The decision applies to all companies offering CFDs in Poland, i.e., brokers, investment companies, banks, branches of foreign investment companies, and credit institutions, as well as entities pas sporting their services to Poland on the basis of the freedom to provide services across borders within the EU.

The impact of the KNF’s decision to limit CFDs offerings to retail clients in Poland will be subject to constant monitoring. On this basis, the KNF will carry out an evaluation of the effects of its decision no later than 12 months from the date of its enforcement.

The full wording of the KNF’s decision together with the justification used to adopt it will be published in the Official Journal of the Polish regulator in the coming days and will come into force on the day following the day of its publication.

Qualifying Clients

As we mentioned yesterday, the list of requirements to qualify as an ‘experienced trader’ is no small feat. Aside from having at least two years of experience, traders need to meet educational and volumes prerequisites.

The KNF’s requirements for trading volume are as follows:
– at least ten transactions in CFDs with a nominal value of at least the equivalent in Polish zloty of EUR 50 000 each within the quarter in at least four quarters
– at least 50 transactions in CFDs with a nominal value of at least the equivalent in Polish zloty of EUR 10 000 each within the quarter in at least four quarters
– at least 40 transactions in CFDs within the quarter in at least four quarters, where the total nominal value of all opened transactions for the 24 months period under assessment is at least the equivalent in Polish zloty of EUR 2 000 000.

Education and knowledge of derivatives are also mandatory as every customer needs to meet one of the following criteria:
– the client holds appropriate professional certificates (CFA, FRM, PRM, ACI, Investment Advisor (DI), Securities Broker (MPW, etc.) or completion of a specialist field of study;
– the client completed at least 50 hours of training in the last 12 months in the area of derivatives, including CFDs, to be confirmed either by the relevant certificates or confirmation issued by the relevant organiser of the training or , in each case provided that the organizer of the training has verified the client’s knowledge before any such certificate or confirmation is issued;
– at least one year of work experience at a position which requires professional knowledge of transactions regarding CFDs or other derivatives.

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