How to become a Forex/CFD professional client

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The MiFID II directive and ESMA’s product intervention have introduced numerous changes for retail clients, and one of the most important and most troubling changes for traders is the limitation of maximum leverage for CFDs . This is all intended to protect investors. But what if an investor is aware of the risks and still wants to use higher leverage?

This is where professional client status comes in, as it’s exempt from ESMA restrictions. Simply change your classification with your Forex/CFD broker.

Professional client – advantages and disadvantages

Becoming a professional client with a forex broker allows you to bypass the maximum leverage limit . Depending on the broker, you gain access to much higher leverage, which can be as high as 500:1.

On the other hand, as a professional client , we lose the mandatory negative balance protection provided for retail clients. This means that our trading becomes much riskier, and we (especially with high leverage) run the risk of generating an overdraft on our investment account. It’s worth remembering that some brokers also offer negative balance protection for professional clients.

How to become a professional client

ESMA has introduced specific rules that every trader must meet to qualify for professional client status. These rules apply to all brokers subject to ESMA supervision, meaning those operating within the European Union.

Two of the three criteria must be met :

1. Concluding transactions of significant value at least 10 times per quarter over the last four quarters . A significant value is defined differently by different brokers and ranges from €40,000 to €50,000 (such a value can be achieved, for example, after concluding 10 transactions with a nominal value of 0.4-0.5 lots on the EURUSD pair).
2. Managing an investment portfolio equivalent to EUR 500,000 or more.
3. Working in the financial sector for at least one year in a position that requires professional knowledge of financial instrument transactions or brokerage services (a CV is sufficient to confirm skills).

Please note that as of August 4, the Polish Financial Supervision Authority (KNF) has introduced an individual interpretation of the first of the above conditions . The Polish regulator’s interpretation of this condition assumes that the transaction value, in this case EUR 50,000, refers to the amount before taking into account leverage.

What does it look like in practice?

1. Concluding transactions of significant value at least 10 times per quarter over the last four quarters .
   If you have an account with a given broker with reasonable trading volume and a history of several or more months, the broker likely won’t ask for additional proof of meeting the requirements, even if you don’t quite meet the turnover figures. However, if you trade microlots or small orders with a given broker, you’ll need to provide proof in the form of a statement from another broker.
2. Management of an investment portfolio equivalent to EUR 500,000.
   In this case, it’s not about funds deposited with the broker, but about all assets you own. These could be, for example, stocks, cash, bonds, or investment funds . However, the broker won’t consider “non-tradable” assets such as real estate, cars, or paintings.
   In practice, if you declared high earnings or savings when opening an account and your deposit is high enough, the broker will probably not require documents confirming the amount of your assets.
3. Working in the financial sector for at least one year.
   In this case, brokers don’t fully have the tools to verify your declaration. They can’t verify whether you worked for the company you provided or how long you worked there. If you’re under 20 years old and don’t indicate several years of experience in the industry, this requirement will likely be met. Some brokers also include forex trading as experience.

To apply for professional client status, simply log in to your broker’s client panel. Most of them will already provide a survey to complete. If you don’t find this option, contact your broker’s support team.  

Remember that by becoming a professional client you increase the risk of losing your capital (higher leverage and no negative balance protection), so only take this step if you are truly aware of this risk.

Alternative solution – Brokers outside the European Union

Some traders have decided to bypass ESMA restrictions and use the services of brokers operating outside the EU. It’s worth paying attention to a few details before taking this step.

1. Appropriate jurisdiction
   Avoid brokers registered in tax havens and small, shady jurisdictions. Instead, look for highly developed countries.
2. Weaker protection
   When trading with a broker outside the EU, you should remember that it will be much more difficult to enforce your rights, if only due to the distance. Furthermore, some national funds protecting investors against broker insolvency are structured in such a way that they do not protect traders from other jurisdictions.

One reliable broker not subject to ESMA restrictions is IC Markets from Australia . Other non-EU brokers are also available on our website.

We’d appreciate any feedback on the practicalities of becoming a professional trader. This will help us keep this thread relevant. Please share your opinions and experiences with us at [email protected].