ESMA Shoots Down Poland’s 100:1 Leverage Proposal
- ESMA’s opinion also pours cold water on CySEC’s proposal for tiered leverage of up to 50:1

The European Securities Markets Authority on Wednesday issued its opinion on the product intervention measures proposed by Poland, Germany, Hungary, and Malta. All of the attention, however, has been focused on the pan-European regulator’s decision regarding the 100:1 client category proposed by the Polish financial regulator, the KNF.
According to the decision published by the ESMA today the Polish KNFs proposal to allow certain qualified retail clients to trade Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term with 100:1 leverage is not justified and proportionate. The news comes amid a looming lapse of the product intervention measures adopted at a pan-European level on July 31.
The Polish regulator proposed the policy due to the significant capital requirement for professional reclassification at a European level. The KNF has stated in its analysis that the €500,000 assets requirement is prohibitively high for the country’s residents.
Client Offshore Moves a Factor
The Polish regulator stated that it has been looking at available data and concluded that too many customers have moved their accounts to jurisdictions that allow higher leverage trading. The solution proposed by Polish authorities was a category which is enabling brokers in Poland to allow 100:1 leverage to a group of traders that meet a set of predetermined criteria.
The KNFs sound judgment deserves kudos here, as the country was the first one to take into account data about clients moving to trade offshore. The regulator did recognize the demand on the part of clients and aimed to allow them to make riskier bets with higher leverage provided that they meet a strict list of requirements.
Qualifying Traders
The measure was to apply only to clients who are residents of Poland, have accumulated at least two years of experience and were well acquainted with derivatives trading. The KNF also required the client to meet any of the following trading volume requirements to be considered an experienced trader:
- 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.
Knowledge of derivatives was also specified in another set of criteria for the traders:
- 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.
Meeting either of the three criteria listed above is sufficient ground to meet the derivatives knowledge point.
Cold Water on CySEC CySEC The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision and control of the Cyprus Stock Exchange as well as transactions executed in the Stock Exchange, its listed companies, brokers and brokerage firms.Furthermore, the regulator also supervises and monitors Licensed Investment Services Companies, Collective Investment funds, investment consultants. and mutual fund management companies.CySEC’s Role in Combatting Market AbuseOne of CySEC’s most important functions is the granting of operation licenses to investment firms, including investment consultants, brokerage firms and brokers. This includes provisions for Cyprus Investment Firms (CIF), who provide and perform investment services and activities either within Cyprus or abroad on a professional basis on certain financial instruments.Finally, CySEC oversees the imposition of administrative sanctions and disciplinary penalties to brokers, brokerage firms, and investment consultants, among others. The group has been a key force in policing the forex and binary options space, which has included several legal actions and curb market abuse. Since 2016, CySEC has sought to take a more aggressive stance against illicit behavior, while also strengthening its handling of investor complaints against entities. CySEC is currently chaired by Demetra Kalogerou, who has held the role since 2011.The CySEC is administered by a seven-member Board, which consist of the Chairman and Vice-Chairman, each of whom provide their services on a full and exclusive employment basis, and five additional non-executive members.All individuals on CySEC’s Board are appointed by the Council of Ministers following a proposal of the Minister of Finance. Their service reflects a five-year term. The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision and control of the Cyprus Stock Exchange as well as transactions executed in the Stock Exchange, its listed companies, brokers and brokerage firms.Furthermore, the regulator also supervises and monitors Licensed Investment Services Companies, Collective Investment funds, investment consultants. and mutual fund management companies.CySEC’s Role in Combatting Market AbuseOne of CySEC’s most important functions is the granting of operation licenses to investment firms, including investment consultants, brokerage firms and brokers. This includes provisions for Cyprus Investment Firms (CIF), who provide and perform investment services and activities either within Cyprus or abroad on a professional basis on certain financial instruments.Finally, CySEC oversees the imposition of administrative sanctions and disciplinary penalties to brokers, brokerage firms, and investment consultants, among others. The group has been a key force in policing the forex and binary options space, which has included several legal actions and curb market abuse. Since 2016, CySEC has sought to take a more aggressive stance against illicit behavior, while also strengthening its handling of investor complaints against entities. CySEC is currently chaired by Demetra Kalogerou, who has held the role since 2011.The CySEC is administered by a seven-member Board, which consist of the Chairman and Vice-Chairman, each of whom provide their services on a full and exclusive employment basis, and five additional non-executive members.All individuals on CySEC’s Board are appointed by the Council of Ministers following a proposal of the Minister of Finance. Their service reflects a five-year term. Read this Term’s Proposed 50:1
Overall, except for the KNF’s proposed experienced trader category, ESMA’s opinions in relation to Germany, Malta, and Poland conclude that the proposed measures are justified and proportionate.
When it comes to Hungary however, the ESMA’s opinion is that while the national measures adequately protect retail clients when dealing with the specific providers to which the national measures apply, these measures are not justified and proportionate because they are addressed only to individual firms and do not have a general application.
The four ESMA opinions also conclude that it is necessary for NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures. This effectively pours cold water on the CySEC’s proposed 50:1 leverage category.
Tiered leverage for different retail clients is not something which the ESMA appears to be happy with, considering data it has accumulated about the performance of higher value traders.
The European Securities Markets Authority on Wednesday issued its opinion on the product intervention measures proposed by Poland, Germany, Hungary, and Malta. All of the attention, however, has been focused on the pan-European regulator’s decision regarding the 100:1 client category proposed by the Polish financial regulator, the KNF.
According to the decision published by the ESMA today the Polish KNFs proposal to allow certain qualified retail clients to trade Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest trading market by volume. According to the Bank of International Settlements (BIS) latest survey, the Forex market now turns over in excess of $5 trillion every day, with the most exchanges occurring between the US Dollar and the Euro (EUR/USD), followed by the US Dollar and the Japanese Yen (USD/JPY), then the US Dollar and Pound Sterling (GBP/USD). Ultimately, it is the very exchanging between currencies which causes a country’s currency to fluctuate in value in relation to another currency – this is known as the exchange rate. With regards to freely floating currencies, this is determined by supply and demand, such as imports and exports, and currency traders, such as banks and hedge funds. Emphasis on Retail Trading for ForexTrading the forex market for the purpose of financial gain was once the exclusive realm of financial institutions.But thanks to the invention of the internet and advances in financial technology from the 1990’s, almost anyone can now start trading this huge market. All one needs is a computer, an internet connection, and an account with a forex broker. Of course, before one starts to trade currencies, a certain level of knowledge and practice is essential. Once can gain some practice using demonstration accounts, i.e. place trades using demo money, before moving on to some real trading after attaining confidence. The main two fields of trading are known as technical analysis and fundamental analysis. Technical analysis refers to using mathematical tools and certain patterns to help decide whether to buy or sell a currency pair, and fundamental analysis refers to gauging the national and international events which may potentially affect a country’s currency value. Read this Term with 100:1 leverage is not justified and proportionate. The news comes amid a looming lapse of the product intervention measures adopted at a pan-European level on July 31.
The Polish regulator proposed the policy due to the significant capital requirement for professional reclassification at a European level. The KNF has stated in its analysis that the €500,000 assets requirement is prohibitively high for the country’s residents.
Client Offshore Moves a Factor
The Polish regulator stated that it has been looking at available data and concluded that too many customers have moved their accounts to jurisdictions that allow higher leverage trading. The solution proposed by Polish authorities was a category which is enabling brokers in Poland to allow 100:1 leverage to a group of traders that meet a set of predetermined criteria.
The KNFs sound judgment deserves kudos here, as the country was the first one to take into account data about clients moving to trade offshore. The regulator did recognize the demand on the part of clients and aimed to allow them to make riskier bets with higher leverage provided that they meet a strict list of requirements.
Qualifying Traders
The measure was to apply only to clients who are residents of Poland, have accumulated at least two years of experience and were well acquainted with derivatives trading. The KNF also required the client to meet any of the following trading volume requirements to be considered an experienced trader:
- 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.
Knowledge of derivatives was also specified in another set of criteria for the traders:
- 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.
Meeting either of the three criteria listed above is sufficient ground to meet the derivatives knowledge point.
Cold Water on CySEC CySEC The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision and control of the Cyprus Stock Exchange as well as transactions executed in the Stock Exchange, its listed companies, brokers and brokerage firms.Furthermore, the regulator also supervises and monitors Licensed Investment Services Companies, Collective Investment funds, investment consultants. and mutual fund management companies.CySEC’s Role in Combatting Market AbuseOne of CySEC’s most important functions is the granting of operation licenses to investment firms, including investment consultants, brokerage firms and brokers. This includes provisions for Cyprus Investment Firms (CIF), who provide and perform investment services and activities either within Cyprus or abroad on a professional basis on certain financial instruments.Finally, CySEC oversees the imposition of administrative sanctions and disciplinary penalties to brokers, brokerage firms, and investment consultants, among others. The group has been a key force in policing the forex and binary options space, which has included several legal actions and curb market abuse. Since 2016, CySEC has sought to take a more aggressive stance against illicit behavior, while also strengthening its handling of investor complaints against entities. CySEC is currently chaired by Demetra Kalogerou, who has held the role since 2011.The CySEC is administered by a seven-member Board, which consist of the Chairman and Vice-Chairman, each of whom provide their services on a full and exclusive employment basis, and five additional non-executive members.All individuals on CySEC’s Board are appointed by the Council of Ministers following a proposal of the Minister of Finance. Their service reflects a five-year term. The Cyprus Securities and Exchange Commission (CySEC) is a financial regulatory authority of Cyprus. CySEC is one of the key watchdog authorities for brokerages in Europe, whose financial regulations and operations comply with the European MiFID financial harmonization law.Founded in 2001, CySEC is instrumental in providing licensing and registration for forex brokers and previously binary options providers.CySEC is responsible for a variety of different functions, which includes the supervision and control of the Cyprus Stock Exchange as well as transactions executed in the Stock Exchange, its listed companies, brokers and brokerage firms.Furthermore, the regulator also supervises and monitors Licensed Investment Services Companies, Collective Investment funds, investment consultants. and mutual fund management companies.CySEC’s Role in Combatting Market AbuseOne of CySEC’s most important functions is the granting of operation licenses to investment firms, including investment consultants, brokerage firms and brokers. This includes provisions for Cyprus Investment Firms (CIF), who provide and perform investment services and activities either within Cyprus or abroad on a professional basis on certain financial instruments.Finally, CySEC oversees the imposition of administrative sanctions and disciplinary penalties to brokers, brokerage firms, and investment consultants, among others. The group has been a key force in policing the forex and binary options space, which has included several legal actions and curb market abuse. Since 2016, CySEC has sought to take a more aggressive stance against illicit behavior, while also strengthening its handling of investor complaints against entities. CySEC is currently chaired by Demetra Kalogerou, who has held the role since 2011.The CySEC is administered by a seven-member Board, which consist of the Chairman and Vice-Chairman, each of whom provide their services on a full and exclusive employment basis, and five additional non-executive members.All individuals on CySEC’s Board are appointed by the Council of Ministers following a proposal of the Minister of Finance. Their service reflects a five-year term. Read this Term’s Proposed 50:1
Overall, except for the KNF’s proposed experienced trader category, ESMA’s opinions in relation to Germany, Malta, and Poland conclude that the proposed measures are justified and proportionate.
When it comes to Hungary however, the ESMA’s opinion is that while the national measures adequately protect retail clients when dealing with the specific providers to which the national measures apply, these measures are not justified and proportionate because they are addressed only to individual firms and do not have a general application.
The four ESMA opinions also conclude that it is necessary for NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures. This effectively pours cold water on the CySEC’s proposed 50:1 leverage category.
Tiered leverage for different retail clients is not something which the ESMA appears to be happy with, considering data it has accumulated about the performance of higher value traders.