Breaking: Poland Unveils Plans to Limit Leverage on FX

Polish regulatory authorities have taken further aim at foreign exchange (FX) regulations, introducing new legislation to reduce Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term to a maximum of 1:25 as well a broader mandate to publicly alert investors to any unauthorized activity. The efforts reflect Poland’s increased emphasis on protecting clients and placing its regulations on par with other countries.

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Polish regulators have also begun to wield more power, facilitating harsher penalties on unlicensed entities. In its latest bid to shore up the FX market, the Polish Financial Supervision Commission (KNF) is altering the maximum leverage available for retail clients. Previously the maximum leverage was pegged at 1:100 with a margin of 1 percent - the new regulations will impose a maximum leverage of 1:25 with a margin of 4 percent.

In addition, the KNF will install a new mechanism for external judicial control which will allow the regulator to liaise with other telecommunications services providers (internet, phone, etc.) to obtain any pertinent information regarding unlicensed brokers (names, phones, addresses, etc.).

The KNF will also gain new powers regarding alerting investors and Polish clients of potential scams. The regulator will be entitled to include the names of firms in a publicized domain list, even if no notice of a suspected crime has been released, as long as the operations in question are targeting Polish clients. This ability will aid the KNF to maintain its jurisdiction domestically.

Growing mandate

The latest measures constitute the Polish regulator's widening legal mandate to police the domestic FX and financial services industry. Earlier this year, the KNF implemented new measures to curtail access to the market for unauthorized Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term brokers. The watchdog has since been empowered to regularly update and maintain a list of unregulated companies that are targeting Polish clients, and ban their access to the market via internet service providers.

The Polish authority also augmented its power to fine companies that are providing financial services in the country unlawfully. Previously the KNF was able to levy penalties of up to PLN 5 million ($1.35 million), and it has since proposed a doubling of the maximum fine.

Indeed, multiple EU countries have been the target of unauthorized brokerages for several years now, with no shortage of tactics deployed against a vulnerable customer base. Polish regulatory authorities have taken notice of this trend and have opted to bolster the measures available against such activities. Poland represents one of the first instances in the EU of a regulator actively engaging in traffic filtering from such unregulated websites to protect retail clients in the country.