Margin to increase for retail traders

Our broker has granted us professional client status.

To be classified as a professional client the qualification is 2 out of the following three statements below:

  1. Carried out CFD, spread betting or forex, in significant size, at an average frequency of 10 per quarter over the previous four quarters
  2. An investment portfolio (including cash deposits and financial instruments) exceeding €500,000
  3. Work or have worked in the financial sector for at least one year in a professional position, which requires knowledge of CFDs, spread betting or forex

Why is professional client status a big deal? Because margin requirements will increase substantially for ‘retail traders’; for professional clients they will not.

What is ‘margin’?

  • It is a good faith deposit that a trader puts up for collateral to hold open a position.
  • It is not a transaction cost, but a portion of our account equity set aside and allocated as a margin deposit.
  • Trade size determines the amount of margin needed to hold open a position. As trade size increases, margin requirement increases.

This has no effect, however, on our usual spread payment: which we consider as a true identification of a retail trader. If we pay a standard spread then by definition we are retail traders.

Institutional proprietary traders (or ‘prop’ traders as they are known) trade the firm’s money (not clients money) and often at a reduced spread cost or no cost at all. They are, to our mind, non-retail traders.

But to be considered a professional client, and thereby maintain a desirable margin commitment, is excellent.

Published by Day Trader

I flew fast jets for 30 years of my life. I've traded full-time, more or less, for the last ten years, initially from fundamentals and over the last few years as a dedicated day trader. I live on the North Norfolk coast.

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