Retail vs. Professional client status: Which is right for you?

2018 has been a year of changes for CFD and Forex traders in the EU. When the European Securities and Markets Authority (ESMA) published new regulatory requirements for CFD brokers on June 1, 2018, resulting in different trading terms being required for Retail and Professional clients.

This leaves many traders with the question, which client classification is right for them?

In this article, we will outline the major differences between the two classifications so you can make the best judgement for your trading journey.

Why are there different client classifications?

MiFID II regulations require CFD brokers to differentiate between Retail and Professional clients.

Because CFDs are leveraged instruments (with leverage for Professional clients up to 1:500), while the potential for profit is multiplied, the potential for losses is also multiplied. Therefore, ESMA does not consider highly leveraged trading to be suitable for all investors and, from 1 August 2018, has put in place measures to protect Retail clients from potential losses.

It is possible for an investor to request to be categorised as Professional client. In order to be eligible, certain qualitative, quantitative and procedural requirements must be met. Professional client status has certain features, including:

• Reduced margin requirements (increased leverage): Trade at 15-25 times lower margin rates than retail clients, with leverage up to 1:500.
• Bonus programs: Get full access to all existing and prospective bonus programs and special offers.
• Priority access to new products: Get the opportunity to trade and invest in new products before they are released to the full Admiral Markets client base.

Meanwhile, Retail clients benefit from stronger protection in their trading, including:

• Unlimited negative balance protection: If your account balance falls below zero due to unexpected market changes, we will automatically reset your balance to zero. This ensures you will not lose more than your initial deposit.
• Stronger regulatory protection: Benefit from all the regulatory protections given to retail clients, including the opportunity to use the Financial Ombudsman Service.

The comparison: Retail vs. Professional client benefits

If we compare the two client classifications side by side, it becomes much easier to compare the features of each.

Simply, Admiral Markets Pro gives traders access to higher leverage, cash rebates and priority access to new products, while the service provided to Retail clients offers greater investor protection.

Both professional and retail clients get the access to our trading platforms, instruments (with access to new instruments only available to Admiral Market Pro clients) and trading tools and have the same spreads, commissions and daily financing. There is no difference in terms of any costs.

Available leverage for Retail and Professional clients

Following the ESMA product intervention measures on CFDs, here are the maximum leverage limits available to the different client classifications, based on the trading instrument.

Retail client leverage limits

• 1:30 (3.33% margin) for Forex majors
• 1:20 (5% margin) for main index CFDs, forex small caps and gold CFDs
• 1:10 (10% margin) for other commodity CFDs except gold
• 1: 5 (20% margin) for individual stocks (equity CFDs) and other underlyings
• 1:2 (50% margin) for CFDs on cryptocurrencies

Professional client leverage limits

• Up to 1:500 (0.2% margin) for forex majors, forex minors, some indices (ASX200, DAX30, DJI30, FTSE100, NQ100, SP500), and some commodities (gold, silver, XAUAUD, WTI and BRENT)
• Up to 1:200 (0.5% margin) for remaining indices and bonds
• Up to 1:100 (1% margin) for remaining commodities
• Up to 1:25 (4% margin) for forex exotics
• UP to 1:20 (5% margin) for individual stocks (equity CFDs) and CFDs on cryptocurrencies

Note that the maximum leverage available to Professional clients depends on the notional position value in their account currency, so larger positions may not qualify for the highest leverage. Learn more.

Which client classification is right for you?

While every trader will have to make their own judgements regarding their preferred trading classifications, our guidelines rely on trading experience.

A trader who is new to Forex and CFD trading would be wise to choose the standard, Retail client classification, which includes lower leverage and higher protections. Leverage not only multiplies potential profits, but also multiplies potential losses, and Retail clients are protected from the full extent of those losses due to their lower access to leverage.

By contrast, Admiral Markets Pro is targeted at experienced Forex and CFD traders who are confident in managing their risk and desire the freedom of higher leverage and fewer regulatory restrictions.

To assess your eligibility for Professional trading terms, we recommend asking yourself the following questions:

• Have you made 10 transactions of a significant size per quarter in the last year in relevant markets?
• Does your portfolio of financial instruments exceed €500,000?
• Have you worked in the financial sector for at least one year, including self-employment?

If your response to at least two of these questions is 'yes', then you can apply for Professional client status. We will then also assess your expertise, experience and knowledge so that we understand that you are capable of making investment decisions in, and understanding the risks involved with respect to trading.

How to become a Professional client

To apply for reclassification as a Professional client, complete the application form located in your Trader's Room.

What if you are not eligible for Professional client status?

If you are not eligible for Professional client status, you will maintain your status as an Admiral Markets Retail client.

This means you will still be able to trade over 7,500 markets and the opportunity to profit on both long and short trades, with leverage of up to 1:30. You will also have access to the world's most popular trading platforms - MetaTrader 4 and 5 - and can accelerate your results with our exclusive MT Supreme Edition add-on and Volatility Protection Settings.

Or, if you're keen to invest as well as trade, build a portfolio of exchange-traded funds and stocks on your Invest.MT5 account.