KNF Survey: Is a leverage of 1: 100 important for traders?

The Polish Financial Supervision Authority has prepared a questionnaire in which it asks, inter alia, whether we invest with Polish or foreign brokers and what has the greatest impact on what kind of residence broker we choose. The Office also wants to know how the leverage level changed our results to Forex market i CFDs and what losses and gains we are able to accept.

The survey is the result of the decision of the Polish Financial Supervision Authority in August 2019, which maintained the regulations on retail clients concluding transactions on contracts for differences (CFDs). It was then that it was decided to permanent limitation of the leverage to the amount of 1:30, which (according to the Commission) was to protect individual investors from large and quick losses. Some traders have already moved to brokers registered in countries where there were no such restrictions. In the case of Poland, changes introduced last year were to some extent different than in other countries of the European Community. Now the PFSA wants to check whether the changes achieved the intended effect, and if so, what. However, there is no detailed data on Poles investing through foreign brokers, so he asks about them in the survey and counts on a response from traders.

There were 15 questions in the survey. Among them we can read:

• Have you invested in CFDs using the services of a Polish broker in the period from August 1, 2018 to August 1, 2019?
• Did you start investing or did you return to investing in CFDs with a Polish broker as a result of the increase in leverage on some underlying assets that occurred from August 2, 2019?
• Are you currently investing in CFDs using the services of a broker outside the European Union?

KNF vs. ESMA and 100: 1 leverage

The Polish Financial Supervision Authority also wants to know if a leverage of 1: 100 would encourage traders to return to Polish brokers. Although it was initially limited to the 30: 1 level on Forex instruments, which was in line with the guidelines of the European Securities and Markets Authority (ESMA), an additional category of retail client was later introduced (experienced customer), allowing to use the leverage of 1: 100, which made Poland in this respect the most liberal country in the entire European Union. It even met with criticism from ESMA, but the KNF made its way and to this day Polish brokers have the opportunity to offer a 1: 100 leverage for experienced clients. You just have to meet certain conditions. Would the Polish regulator want to abandon them now?

The KNF also asks in the survey about the expected annual rate of return and the acceptable level of losses. Interestingly, the questions, or rather answers to them, are structured in such a way that investors can mark a greater acceptable loss (30% of funds) than the expected annual profit (the highest level is over 20%).

The anonymous questionnaire can be completed until the end of 2020. This is one of the elements of the assessment of this decision, which was made over a year ago. The evaluation was to take place exactly 12 months after the changes were introduced, but it was decided to postpone the survey to the end of the year, and the publication of its conclusions to the second quarter of 2021, due to the unexpected pandemic of the Covid-19 coronavirus.  

"- Replies are provided anonymously and are intended to collect data on CFD transactions in the period before and after the introduction of the above-mentioned limitation, taking into account the place where the investment firm serving the client is based, as well as collecting opinions of individual clients, in particular those who obtained the status of an experienced customer about the introduced restriction. The KNF Office encourages individual clients to take part in the survey " - informs the Polish Financial Supervision Authority in a release