Professional vs Non-professional status

[Big_P]

Hi all,

I have been developing a trade automation with a programmer which was giving some pretty good results when backtested. I took the automation live a few weeks back and I've hit a snag.

The automation takes roughly an equal number of longs as short trades. But my short trades are often being rejected, as shares without a "KIID" (Key Investor Information Document) are not allowed to be short-traded by traders with a non-professional status.

My broker (Interactive Brokers) ask me to declare Professional / Non-professional status according to a checklist. I am very clearly a non-professional according to their criteria and I get cheaper exchange fees as a result.

I'm curious - do those of you who are retail traders on this forum (and trade stocks) have the same issue? Would there be an issue to declare Professional Status even though on paper, I am not?

What do you guys do?

Many thanks,

Big P

 

[BigDeal]

If you deal with a regulated entity, you will not be able to register as professional when you don't meet the criteria unfortunately

 

[MrMosquito]

Hi all,

I have been developing a trade automation with a programmer which was giving some pretty good results when backtested. I took the automation live a few weeks back and I've hit a snag.

The automation takes roughly an equal number of longs as short trades. But my short trades are often being rejected, as shares without a "KIID" (Key Investor Information Document) are not allowed to be short-traded by traders with a non-professional status.

My broker (Interactive Brokers) ask me to declare Professional / Non-professional status according to a checklist. I am very clearly a non-professional according to their criteria and I get cheaper exchange fees as a result.

I'm curious - do those of you who are retail traders on this forum (and trade stocks) have the same issue? Would there be an issue to declare Professional Status even though on paper, I am not?

What do you guys do?

Many thanks,

Big P

trading is always a dynamic wold, you should not expect the situation to be the same for a long while.

 

[tomorton]

Registering as a professional client does not mean you have to be an employee or even self-employed. It's a way for clients with high levels of capital to trade at higher levels of leverage than ESMA regulations permit for ordinary private retail clients. The downside is that professional clients sign away much of the strong regulatory protections that other clients get.

Different brokers may have different registration criteria in order to be categorised as a professional client. When I last checked this a few years back my broker wanted a deposited amount in the account of at least £500,000.

 

[progressa]

Not sure if this thread has died off altogether but I’m curious about the original post. I was able to switch to a pro account easily back in 2018 although had a similar profile to you, @BigP. I was given massive leverage to play with but massive risk also obviously. No checks at the time to see if I met the broker or regulator criteria, it was a standard account swap, took a couple of hours to be approved. This was no bucket shop either.

 

[progressa]

Registering as a professional client does not mean you have to be an employee or even self-employed. It's a way for clients with high levels of capital to trade at higher levels of leverage than ESMA regulations permit for ordinary private retail clients. The downside is that professional clients sign away much of the strong regulatory protections that other clients get.

Different brokers may have different registration criteria in order to be categorised as a professional client. When I last checked this a few years back my broker wanted a deposited amount in the account of at least £500,000.

Risky business for the brokers though if their registration criteria don’t meet those of ESMA. No checks in my case whether I had anything like that kind of capital.

 

[BigDeal]

Not sure if this thread has died off altogether but I’m curious about the original post. I was able to switch to a pro account easily back in 2018 although had a similar profile to you, @BigP. I was given massive leverage to play with but massive risk also obviously. No checks at the time to see if I met the broker or regulator criteria, it was a standard account swap, took a couple of hours to be approved. This was no bucket shop either.

Like you, I also had a professional account which started quite a while before the ESMA new rules were introduced. Presumably you also started yours before the changes in August 2018. It was easy to set up. I don't remember what the criteria was, but I think it was just agreeing that I understood the leverage rules. I actually requested a downgrade to retail trader some while after the new rules came into play, but there was no hint that they wanted to reassess my circumstances. So for those already trading the professional level, it seems they could continue. However I am sure that legitimate brokers will be strict on granting professional trader status now.

 

[progressa]

Like you, I also had a professional account which started quite a while before the ESMA new rules were introduced. Presumably you also started yours before the changes in August 2018. It was easy to set up. I don't remember what the criteria was, but I think it was just agreeing that I understood the leverage rules. I actually requested a downgrade to retail trader some while after the new rules came into play, but there was no hint that they wanted to reassess my circumstances. So for those already trading the professional level, it seems they could continue. However I am sure that legitimate brokers will be strict on granting professional trader status now.

Interesting - thanks. We obviously were there at a moment in time. Did you actually downgrade or did you stay with the pro account?

 

[BigDeal]

Yes I decided to downgrade because my circumstances changed and it was a better arrangement for me.

I sometimes wish I'd stayed with the pro account, but on balance I'm happier with the retail leverages overall.