Spread Betting - Register as a Professional Client or a Retail Client??

[Jason101]

With spread betting companies, there is often the option to register as a Retail Client or as a Professional Client.

IG are currently encouraging all clients (that fit the criteria for a professional account) to register as a professional client rather than retail.
This is on the basis that professional clients wont be greatly affected by the FCA's upcoming proposed margin changes in spread betting and CFD's.

I was wondering how you are registered and if you were looking at changing this?

 

[xnox]

With spread betting companies, there is often the option to register as a Retail Client or as a Professional Client.

IG are currently encouraging all clients (that fit the criteria for a professional account) to register as a professional client rather than retail.
This is on the basis that professional clients wont be greatly affected by the FCA's upcoming proposed margin changes in spread betting and CFD's.

I was wondering how you are registered and if you were looking at changing this?

In the context of spread betting, would professional client registration make winnings a taxable income?

Also, do professional clients become eligible counterparties, and thus lose FSCS protection that retail client classification has?

 

[Hoggums]

I have changed to professional client status. I was already a premier client because of the size of my account. I build up large positions over time and margin rates at IG are already double what they were 2 years ago and I don't fancy them doubling again. I had actually already put in plans to manage that next year - but now I can leave that aside.

As a result my margin rates have actually decreased slightly yesterday by 10%.

Personally I think if you are nowhere near using up half of your margin then you are better staying as a retail client - there are some extra protections in place regarding the way they execute your trades.

There's quite a detailed questionaire to fill out before you are accepted too. It asks about your financial position, salary, savings/investments and experience you have in the finance industry. If you are just regular Joe punter with a couple of grand in the account I wouldn't bother.

 

[Jason101]

In the context of spread betting, would professional client registration make winnings a taxable income?

Also, do professional clients become eligible counterparties, and thus lose FSCS protection that retail client classification has?

I have changed to professional client status. I was already a premier client because of the size of my account. I build up large positions over time and margin rates at IG are already double what they were 2 years ago and I don't fancy them doubling again. I had actually already put in plans to manage that next year - but now I can leave that aside.

As a result my margin rates have actually decreased slightly yesterday by 10%.

Personally I think if you are nowhere near using up half of your margin then you are better staying as a retail client - there are some extra protections in place regarding the way they execute your trades.

There's quite a detailed questionaire to fill out before you are accepted too. It asks about your financial position, salary, savings/investments and experience you have in the finance industry. If you are just regular Joe punter with a couple of grand in the account I wouldn't bother.

The tax status does not change (but that was one of my first thoughts too.)

My account size is bigger than a couple of grand but not into the hundreds of thousands, which is probably the arena the professional accounts are aimed at. I do find myself often easily using up 50% margin.

The FCA regulations state that all retail client accounts need to be held in a ring fenced account. Where as the professional status client's accounts do not need to be ring fenced and can be mixed in with CFD/spread bets company's monies, which would mean less protection.

But IG has assured me that their own policy is to hold their professional clients funds in the same protected accounts as the retail accounts, (without being compelled to by the FCA) but he could not point to any clause in their terms and conditions which state this is the case.

Hoggums, can I just confirm with you that your reason for shelving future plans to combat proposed margin changes is primarily due to your change in client status?

 

[Hoggums]

Hoggums, can I just confirm with you that your reason for shelving future plans to combat proposed margin changes is primarily due to your change in client status?

Yes that's right. Obviously when the market crashes IG do tend to raise their margin rates anyway and for that reason & others I like to leave at least 50% of my account free to cope with those situations when they occur.

You can see the proposed changes here... https://www.fca.org.uk/publication/consultation/cp16-40.pdf

Section 1.16 - we are talking about my margin rates going from 0.5% to 2.5% (see section 3.2 - I trade indices) if I stayed retail - which would quintuple my margin requirements and would limit my position sizes.

For me it was an easy decision - it would adversely affect me but I don't think it's one most people should rush into. The FCA is trying to protect peoples interests here and I agree with the proposals in general. They are just not right for me.

 

[Tradingforfun]

Is IG Safe for a newbie?

I have changed to professional client status. I was already a premier client because of the size of my account. I build up large positions over time and margin rates at IG are already double what they were 2 years ago and I don't fancy them doubling again. I had actually already put in plans to manage that next year - but now I can leave that aside.

As a result my margin rates have actually decreased slightly yesterday by 10%.

Personally I think if you are nowhere near using up half of your margin then you are better staying as a retail client - there are some extra protections in place regarding the way they execute your trades.

There's quite a detailed questionaire to fill out before you are accepted too. It asks about your financial position, salary, savings/investments and experience you have in the finance industry. If you are just regular Joe punter with a couple of grand in the account I wouldn't bother.

By the sounds of it, you seemed quite pleased with the IG platform. I am looking for a broker to try out CFDs but everyone has bad reviews - including IG. What is your opinion on this. Thanks.

 

[Staoh]

Hi Hoggums,

I've been a retail client with IG for 15 years.
I do not have the necessary one years financial industry experience or 500k portfolio.

My 15 years IG share trading experience I feel should count.

Is there any way you know of to qualify as professional without
these?

Thank you

 

[Ronald Williams]

It definitely seems like they are doing this in order to skirt the crappy ESMA rules around retail leverage. But let's say I don't/can't register as a professional client, what am I to do?

Put up a bigger deposit or just move to a different broker outside EU? How are you all handling it?

 

[jm1054]

It definitely seems like they are doing this in order to skirt the crappy ESMA rules around retail leverage. But let's say I don't/can't register as a professional client, what am I to do?

Put up a bigger deposit or just move to a different broker outside EU? How are you all handling it?

I'm not eligible to register as a professional client and so (unless somethings changes between now and 1st August) I'm moving over to IC Markets.

 

[Ronald Williams]

I'm not eligible to register as a professional client and so (unless somethings changes between now and 1st August) I'm moving over to IC Markets.

For what it's worth a lot of people have been positive about switching to Dukascopy as another option...this is an entirely annoying change though

 

[tomorton]

It definitely seems like they are doing this in order to skirt the crappy ESMA rules around retail leverage. But let's say I don't/can't register as a professional client, what am I to do?

Put up a bigger deposit or just move to a different broker outside EU? How are you all handling it?

LCG stipulate to be re-classified as a professional client, need at least 1 year's experience working in the finance sector plus EUR 500k in a financial instruments portfolio, plus frequent trading in last 4 quarters. Not an option for me.

 

[jkane]

everyone screwed

no real advantages anymore to spread trading with new laws

 

[FXX]

everyone screwed

no real advantages anymore to spread trading with new laws

Advantage?

With greater leverage comes greater risk and is likely the main cause of most retail traders going bust. All professional traders use little to no leverage and get by just fine. For us is means taking a little longer to get to that point but it sure isn't a disadvantage to your edge.

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