Margin to increase for retail traders

We have been awarded professional client status by our brokerage.

To be classified as a professional client the qualification is 2 out of the following 3 statements below:

  1. Carried out CFD, spread betting or forex, in signicant 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.
  • When trading with margin the amount of margin needed to hold open a position is determined by trade size. 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 firms 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 great.

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