Exclusive: Poland to Restrict Maximum Leverage on FX Trading to 50:1‎

The proposition allows ‎brokerage firms to raise the maximum permitted leverage to 100:1 ‎under one condition.

Finance Magnates has learned that the Polish Ministry of Finance has ‎submitted a draft of a new law, which aims to further limit the maximum ‎leverage on foreign exchange trading from 100:1 to 50:1, the latest ‎crackdown in a regulatory shakeup of the industry.‎

The draft of new propositions prepared on December 8, 2017, however, allows brokerage firms to raise the maximum permitted leverage to 100:1 only if the customer made at least 40 transactions during the last 24 months.

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Earlier in July, Polish authorities announced plans to cut the maximum leverage from the current 1:100, with a margin of 1 percent, to 1:25 with a margin of 4 percent.

The efforts reflected Poland’s ongoing clampdown on the high-risk retail trading products. It also places the country’s regulations on par with other European nations, notably the UK’s FCA, which has proposed a maximum of 50:1, and Cyprus’ CySEC, which has made similar limitations but added provision for experienced traders to access higher leverage levels.

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Recently, reports provided to the Polish Financial Supervision Authority (KNF) by the nation’s regulated brokers showed that 36.1 percent of clients investing in currency derivatives made a profit, down from 39.5 percent in the previous quarter. Reports provided to the KNF last year showed that the percentage of investors making money from trading in the OTC market averaged 20.7 percent in the period from 1 January 2016 to 31 December 2016. But ultimately, 80 percent of the profitable traders made losses in the long run.

The KNF noted on several occasions that retail forex investors enter into a market that is lightly regulated while they are allowed to supercharge their bets with high leverage. This mix can lead to wins, but more often it leads to big losses where some traders can have their entire investment wiped out in a matter of days.

Investment services and activities in Poland may only be provided by companies licensed by the KNF under the terms of the Act on Financial Market Supervision.

The KNF’s tightening also covers activities involving acquisition of retail clients, including information provided through marketing channels. The only exception allowing entities other than the approved operators to perform such activities is when the product information is offered to a broad group of prospective clients on an undefined basis.

Current laws allow Polish authorities to slap a fine of up to PLN 5 million ($1.4 million)‎ on companies that are providing financial services in the country unlawfully,. The KNF is proposing doubling the maximum fine and criminalizing such activities.

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