KNF specifies the terms of transition to a Professional Client

The Polish Financial Supervision Authority (Polish Financial Supervision Authority) has issued guidelines to Polish Forex brokers specifying the requirements to change the categorization of clients from retail to professional. Unfortunately, news for Polish brokers and traders are not very good.

The KNF interprets (in its own way) ESMA

As of August 1, new regulations regulating trading on the CFD market in the European Union came into force. There have been many key changes, but the reduction in leverage to the maximum level of 1 is definitely considered the most important: 30. The goal was, first of all, to protect investors more effectively against sudden losses and risks that they might not be fully aware of.

However, a certain wicket was left. These limits only cover the so-called a retail client, i.e. considered a person with limited knowledge, experience and capital resources. You can change this status to the so-called professional client. Of course, there are certain conditions. According to the regulator, it is an investor with a specific trading experience, sufficiently large capital, or experience in the financial industry.

Conditions imposed by ESMA

To change your qualification it is enough to satisfy 2 with 3 conditions. These are:

1. Carrying out transactions with a value of at least 50 EUR each, with a minimum of 000 transactions per quarter in the last 10 quarters;
2. The value of the investment portfolio held exceeds the equivalent of EUR 500 (or the equivalent in another currency);
3. Professional experience for at least one year in the financial sector in a position requiring knowledge regarding transactions in financial instruments or brokerage services.

More on the ESMA terms we wrote in a separate article HERE.

The problem was in relatively general terms of the categorization change. The KNF decided to dispel doubts in the home yard and issued guidelines to specify this process, which include Polish Forex brokers and their clients.

Professional client not for "Kowalski"

The KNF guidelines refer primarily to the first point regarding trading. And this interpretation turns out to be the key that unfortunately closes the aforementioned gate left by ESMA to the vast majority of traders qualified as retail.

Interpretation of conditions by the Polish regulator assumes that you actually need to make a minimum of 10 transactions in the last 4 quarters, but the transaction value 50 000 EUR refers to the amount BEFORE taking into account leverage. Previously, by all brokers in Poland, this provision was understood as 5 for purchase and 5 for sale transactions, where the minimum volume had to be, for example: 0,5 lot on a EUR / USD pair (or another instrument from the euro as the base currency or more than EUR, e.g. GBP).

The Commission's position specifies that it must be a transaction in which the client actually involved the 50 000 EUR in his account. This means that to fulfill this condition with the current leverage level 1: 30 for major currency pairs, the minimum transaction would have to be 15 flights each (!) for EUR / USD pair, and Polish trader it would have to involve 215 000 with real capital.

While in the earlier, free interpretation of ESMA conditions, this point was feasible for the average trader to meet, now it is practically unrealistic for 99% of them.

At the moment, nothing is known about the reference to ESMA regulations by regulators from other EU countries. Thanks to this, it can be assumed that with foreign brokers (for now) everything remains "the old way", and the conditions set must be met according to the criteria interpreted by the brokers themselves.