Polish Regulator Ignores ESMA’s Leverage Limit
XBT is the first Forex and CFD broker to allow 100:1 leverage despite the fact that the European Securities and Markets Authority (ESMA) recommends a much lower ratio. XBT relies on the fact that the Polish Financial Supervision Authority (KNF) ignored the ESMA regulatory changes aimed at retail traders.
Other Brokers to Follow XBT
Last year, the ESMA adopted new rules related to CFD and FX trading, according to which the leverage should be capped at 30:1. Most of the brokers regulated in the European Union (EU) have already adopted these changes. However, the Polish financial regulator doesn’t agree with the leverage limit. Thus, the KNF allowed brokers with businesses in Poland to increase the maximum leverage to 100:1.
XBT, which is based in Poland, became the first broker to permit a special category of traders to enter the markets with only 1% of margin. Nevertheless, there are certain conditions that traders must meet before becoming eligible to benefit from such a high leverage.
Other CFD brokers plan to follow in the footsteps of XBT. For instance, the Polish branch of CMC Markets revealed that it would implement a similar approach for local traders. While the London-based broker supports the ESMA’s changes, it is affected by the side effects of imposing restrictions on certain investment strategies.
CMC Markets representatives reportedly said:
The introduction of the “Experienced Retail Client” status may allow clients to make better use of investment opportunities. As far as the security of capital is concerned, it is worth remembering that every quarter Polish brokers publish the results of their clients who are investing using CFDs, thanks to which the matter has been very transparent for a long time.
XTB Profits & Revenue Tumble on Regulatory Pressure From ESMA
XTB, whose stock is listed on the Warsaw Stock Exchange, has good reasons to be annoyed about ESMA’s restrictions. Last month, the broker released the preliminary results for the first six months of the year. The report revealed that profits and revenues were much lower as the broker was affected by the tighter regulation.
Thus, the company’s total operating revenue in the first half of the year tumbled 55% year-on-year, to $23 million. XTB’s net profit for the same period was $1.34 million (PLN 5.2 million), down from PLN 115 million recorded in the H1 2018.
The profits declined despite an increase in the number of active accounts – to 23,688 as of June 2019. In the first half of 2018, there were 22,135 active accounts on average. The number of new accounts also increased – from 10,046 in H1 2018 to 16,086 during the first six months of 2019.
On the other hand, XTB admitted that ESMA’s new rules would put pressure on small brokers, which will result in more opportunities for well-established companies. The company said:
Small brokers, unable to withstand regulatory pressure and strong competition from larger brokers, will naturally disappear from the market. As a consequence, large brokers are expected to have a growing client base.
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