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Leverage reduction - the voice of objection of the Chamber of Brokerage Houses
Last week, without a doubt, the biggest commotion on the Polish Forex market caused no exchange rate changes and was proposed by the Ministry of Finance bill on the Forex market. The project contains a number of changes, but the most controversial idea is the radical reduction of the maximum leverage for Polish residents to the level of 1: 25 (from July 2015 the maximum is 1: 100).
The Chamber of Brokerage Houses presented their dissatisfaction and own view on the presented bill. The content of the IDM document is presented below.
IDM stand
In the context of proposed amendments to the Act, the Chamber of Brokerage Houses points out that in recent years the activity of foreign companies operating on the forex market has significantly increased, and aggressive and unethical forms of advertising are applied to domestic clients, encouraging the prospect of quick profits to purchase their financial products. These entities are not subject to the jurisdiction of the Polish Financial Supervision Authority, they do not have licenses required in Poland to provide investment advisory services. The investigation of clients' rights towards these entities is very difficult, as they are not subject to the Polish law of the non-domestic supervisor. Unethical practices of foreign companies from the forex market have a negative impact on the image of the entire industry, because they undermine the trust of clients in the Polish financial system.
The Chamber of Brokerage Houses undertakes numerous activities to eliminate fraud of foreign entities on the forex market. The Chamber's goal is, among others increasing knowledge and awareness in the field of investing. Domestic investment entities operate transparently, as required by law, and exercise due diligence in informing their clients about the risks associated with investing in derivatives and assess the adequacy of services to the level of knowledge and customer experience. In connection with the above, the Chamber supports actions aimed at limiting harmful practices on the market, eliminating fraudulent entities and, consequently, ensuring fair competition for domestic brokerage houses operating under the license of the Polish Financial Supervision Authority.
At the same time, the Chamber draws attention to the fact that the proposed amendments to the Act significantly limit the competitiveness of the domestic forex industry to the benefit of foreign entities operating in Poland, but are not subject to national jurisdiction. It is these entities that are mainly responsible for market abuse, which undermines confidence in the entire system and the domestic securities industry. In convection, legislative measures that will not support the domestic forex industry act to the detriment of Polish investors because they support the development of the so-called gray zone of foreign entities, where the domestic investor will search for optimal products for his investment portfolio. In the Chamber's opinion, the introduction of unilateral restrictions currently proposed for the domestic forex industry, while omitting the operation of foreign entities will be to the detriment of the Polish client and the entire market.
According to the estimates of domestic brokerage houses, approx. 40 is active on the Polish forex market. investors, ie around 15% of all active individual investors in Poland. Most of them actively manage their portfolio, consciously using the investment opportunities available on the market. In the financial market, domestic investors look for volatility, their investments diversify accordingly between those with lower and higher risk. Investments in different markets and the complementarity of available instruments give them greater opportunities and better risk management without the need to multiply investment accounts and carry over funds.
The provisions of the Act will cause the migration of clients from Polish investment companies to foreign entities offering them services. As a result, the competitiveness of Polish entities will deteriorate, which will have a negative impact on the profit of the entire brokerage house sector. In addition, clients entering into transactions through foreign entities will be less protected due to the fact that not all entities and institutions appointed to protect them will have the right to intervene.
Creating a competitive legal environment in Poland, supporting the development of the financial market, for the good of its clients requires conscious cooperation between the brokerage industry and the regulator and supervisor. The Chamber of Brokerage Houses, acting as a representative of the environment of brokerage houses and offices, acting for the development of the capital market, declares the willingness of ongoing substantive cooperation with representatives of the Ministry to develop the best legal solutions to improve the safety of financial market participants and reduce harmful practices of foreign entities operating on the Polish forex market.
The path to achieving the strategic goals of the state, set out in the "Plan for Responsible Development", leads through the capital market. A well-functioning financial market with an effective regulatory environment and good reputation attracts both domestic and foreign investors. The stronger the Polish financial market, the more it serves the economic development of the country and the building up of citizens' wealth. Therefore, the interest of the regulator and supervisor is identical to the interest of the brokerage industry.
