XTB Allows ‘Professional Clients’ to Maintain 200:1 Leverage

The move follows the introduction of new ESMA regulations which will limit the leverage available for retail customers.

XTB on Wednesday announced that it would give its professional clients the ability to trade using 200:1 leverage. The announcement follows the European Securities and Markets Authority (ESMA) introduction of new regulations effective from August 1, 2018. The new regulations will reduce the leverage for retail customers to 30:1 or lower, depending on the underlying asset.

While XTB has already incorporated many of the regulations into its current practices, the restrictions on leverage will not apply to its professional customers, according to a statement from the company.

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A professional investor is an investor who meets certain criteria determined by European Union (EU) regulations. An investor can change their classification with their investment firm.

According to the EU regulations, an investor must meet two out of the three criteria in order to reclassify themselves as a professional client:

  • A client has entered into transactions with a value of at least the Polish zloty (PLN) equivalent of EUR 50,000, in a relevant market, with an average frequency of at least ten transactions per quarter during the last 12 months.
  • The value of their portfolio of financial instruments, together with cash included, is at least the equivalent of EUR 500,000.
  • They have worked or currently work in the financial sector for at least one year in a position that requires professional knowledge of transactions in financial instruments or brokerage services.

Professional clients of XTB will continue to benefit from negative balance protection and clients can apply to be re-classified to a retail customer at any time.

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ESMA Leverage Restrictions

On March 27, 2018, ESMA published a statement detailing a number of regulations concerning CFDs. In the statement, it announced that the leverage limits would be 30:1 for major FX pairs, 20:1 for non-major pairs, gold, and major indices, 10:1 for other commodities and non-major indices, 5:1 for stocks and 2:1 for cryptocurrencies.

At the time, the Chair of ESMA, Steven Maijoor, said the regulations were a significant step towards greater investment protection in the European Union, and it would ensure investors can’t lose more money than they put in.

The responsibility for enforcing the measures will be on national financial regulators.

Market response

This move from XTB is in line with the current market trend to allow higher leverage to clients that are willing to reclassify. Firms such as CMC Markets and ActivTrade have also added investment products tailored specifically for professional investors.

XTB is no stranger to making adjustments to its service to protect its clients. In May, it implemented negative balance protection in an attempt to safeguard its clients against losses.

The brokerage has also been updating and expanding its product. Earlier this year, it extended access to ETFs and real stock trading for its clients and began streamlining its online portals.

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