The Chamber of Brokerage Houses (IDM), a self-regulatory organization in Poland, has today announced a set of measures which it expects domestic brokerage houses to follow, when reclassifying retail traders to the “experienced trader” category.
Earlier this year, the Polish Financial Supervision Authority (KNF), defied ESMA’s advice regarding national product intervention measures for contracts for differences (CFDs), by introducing an experienced trader category which allows eligible retail traders to trade with a leverage of up to 1:100.
Following on from this, in order to promote good industry standards and increase customer protection, the Chamber of Brokerage Houses has introduced standards to ensure the uniform verification of experienced traders on the CFD market.
Brokers will need to provide training
In particular, members of IDM will need to provide clients applying for the experienced trader status with training, divided into five thematic blocks. Once this training has been completed, brokers will then need to conduct an examination, to ensure the customer has understood the materials.
The successful completion of this training is one step of the customer verification process, for investors who want to change their status to an experienced trader, the statement released today said.
This step in the verification process aims to protect retail clients while maintaining Poland’s competitiveness in the CFD market. The IDM has not specified precisely what training will be required.
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Commenting on the standards, Waldemar Markiewicz, President of the Chamber of Brokerage Houses, said (translated): “The latest solutions introduced on the domestic CFD market meet the needs of individual investor protection and the challenges of the domestic industry.
“We hope that, above all, it will increase customer safety and their trust in domestic brokerage houses under the supervision of the Polish Financial Supervision Authority, as well as limit the outflow of customers to companies outside the European Union and improve the competitiveness of the domestic brokerage house industry.”
Poland defies EU, but for a good cause
KNF’s unique approach marked yet another case of Poland defying EU-mandated norms. The KNF has been particularly worried about retail investors fleeing offshore, which was one of the motivators for the higher leverage classification.
When ESMA’s more restrictive CFD measures were in place, half of the active and experienced domestic traders in Poland moved their brokerage account to a non-EU country, research by the Chamber found.
In the first months of intervention, Poland saw a significant decline in the turnover of domestic investment companies, with the authority’s members reporting to the PFSA Office that CFD trading fell on average by 50 percent in the first months of ESMA’s intervention.
“To protect customers and increase confidence in the market and Polish brokerage houses, the Chamber decided to implement a uniform standard of verification of retail customer experience among its members. We want other entities offering Polish clients services on the CFD market to also comply with the Chamber’s standards, so that the retail client has the best protection,” added President Markiewicz.