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Leverage 1: 100 remains. But not for everyone… We know the bill of the Ministry of Finance

Leverage 1: 100 remains. But not for everyone… We know the bill of the Ministry of Finance

created Paweł MosionekDecember 14, 2017

In the middle of this year, the amendment of the Finance Ministry Act announced limitation of leverage on the Forex market to 1: 25. But the plans have changed, and it is definitely to the benefit of Polish traders. The new project provides for the possibility of using a lever of 1: 100. On one condition ...

1: 50 for inexperienced traders

After the plans to reduce the 4 leverage in relation to the current limit came to light, the FX industry blew up. There were voices of opposition from a large part of the environment. The Ministry of Finance has therefore proposed public consultations on which representatives of Forex Club and the FxCuffs Foundation were also present. However, at that moment the hopes of leaving leverage at 1 level: 100 was unlikely. What is the ministry's new idea?

Read: The official position of the FxCuffs Foundation

The current project assumes that the standard leverage will be limited to 1:50, i.e. the broker will require a minimum of 2% margin to conclude a transaction. However, there will be a wicket to claim a leverage increase of 1: 100 (1% collateral requirement). The Ministry of Finance proposes that traders who have already concluded at least 40 Forex transactions within 24 months in their "investment career" could apply for higher leverage. You will be able to use your transaction history from any Forex investment account to prove your "seniority". This would mean that experienced traders will not be affected at all by the changes.

The requirement of 40 transactions in 2 years is intended to be a kind of "transition period" during which a novice trader should have time to gain adequate knowledge of leveraged markets and the operation of leverage with top-down risk mitigation.

Below selected fragments of the bill:

"2a. The investment firm performs the purchase or sale of instruments
financial statements listed in Article 2 sec. 1 point 2 (lit. c-i placed by the customer
retail, provided that the margin required for the given
the financial instrument is not less than 2% of the nominal value of this
financial instrument, subject to paragraph 2b-2c.

2b. In the case of orders to sell options that result in the option being issued
the required margin is not less than the bonus value
calculated, with the investment firm's application of a recognized option pricing model communicated to the retail client, plus 2% of the nominal value of this option. ",

b) after paragraph 2b, paragraph is added 2ba and 2bb as follows:
2ba. For a retail customer who has at least 40
transactions on financial instruments listed in art. 2 sec. 1 point 2 (lit. c-i,
during 24 months preceding the submission of the order referred to in paragraph 2a or 2b, at the request of this client, the margin required for a given financial instrument or the value by which the bonus is increased is
not less than 1% of the nominal value of this instrument, respectively
financial or options. "

The success of traders or just a light in the tunnel?

Will the proposed changes reduce the losses of novice investors? It's hard to say at the moment. The industry's opposition, however, was almost unanimous and called for a realistic approach to the subject. We want to think that it is our merit - a small victory for Polish traders in the fight for the conditions on which we will be able to continue our trading in currencies and CFD instruments. Morale up. But there are two problems.

Let us remember that this is only a bill that may still be changed - to a greater or lesser extent. However, the plans of the European regulator ESMA, which will have the final say, may be more worrying. The MIFID II directive is to be announced on January 3, 2018.

Bill (PDF)

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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.

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