Client Classification / Axi EU

Client Classifications

As a client of AxiTrader you can be classified as a Retail Client or a Professional Client. This applies to individuals and businesses, although some larger companies may have a slightly different classification known as ECP or Eligible Counterparty.

All clients have to pass a Qualitive Test to assess their suitability to the products that AxiTrader offer, and this is based on many factors including their financial circumstances, knowledge and experience.

A client may request to be classified differently at any time, and AxiTrader will consider that request, based upon the guidance and rules imposed upon it by the regulators.

Further details on different classifications including Elective Professional, Per Se Professional and Eligible Counterparties are available upon request.

Retail Clients

As a Retail Client you enjoy the greatest protection with rules and regulations imposed by the Financial Conduct Authority (FCA) and the European Securities and Markets Authority (ESMA) designed to ensure you are given every opportunity and assistance when trading in financial markets.

Under rules introduced by ESMA, which all FCA regulated firms must adhere to by 1^st August 2018, a Retail Client has Negative Balance Protection (NBP) meaning they cannot lose more than they have deposited with a broker.

The funds they deposit are also segregated into Client Trust accounts with banks, ensuring the safekeeping of their money in case of anything adverse happening to the broker, as this is kept separate from the brokers own funds.

In addition to that, Retail Clients are also protected by the Financial Services Compensation Scheme (FSCS) which will step in with up to £85,000 per client in the rare instance where if a broker fails that not all the correct amount of client money has been segregated.

Retail Clients also have access to the Financial Ombudsman Service (FOS) who in the event of a dispute with a broker will intervene, look at the facts and pass judgement.

However, in an attempt to ensure that inexperienced traders to not lose too much money, the regulators have imposed restrictions on the leverage that Retail Clients can be offered, which limits the size of trades they can make based on their deposits [see AxiTrader Product Schedules].

The level at which Retail Client losing positions will be automatically closed by online trading platforms is set at a higher level than for those of Professional Clients.

Also, certain bonuses and other incentives previously offered to some Retail Clients are no longer allowed as this was seen by the regulators as an inducement to attempt to get Retail Clients to actively trade.

Professional Clients

Professional clients are not subject to the same restrictions placed upon Retail clients but as a consequence they are not afforded the same level of protection and could lose more money.

So, to ensure a client who requests to be classified as a Professional Client fully understands the consequences of their decision, they must satisfy certain criteria and sign a form listing the downside of this classification.

Professional clients with AxiTrader are divided into two categories:

Professional Segregated
Professional Unsegregated

As the name suggests, this states how client money is treated by AxiTrader, and most clients will come under the Professional Segregated categorisation, unless they have signed a Title Transfer Collateral Agreement (TTCA) which is rare and only usually applies to very large companies or High Net Worth Individuals (HNWI).

For Professional Segregated clients their funds will still be segregated in Client Trust Accounts, as it is for Retail Clients, whereas for Professional Unsegregated clients who have additionally signed a TTCA, their funds will not be segregated and can be used by AxiTrader.

Most individuals who satisfy the requirements to be classified as a Professional Client are ‘electing’ to be classified as a professional and so are technically known an Elective Professional.

To be considered as an Elective Professional client an individual must satisfy at least two of the following:

Have carried out transactions, in significant size, on the relevant financial markets at an average frequency of 10 per quarter over the previous 4 quarters.
Have an investment portfolio of financial instruments and cash deposits which exceeds EUR 500,000.
Have worked for at least one year as a financial sector professional in a role that requires knowledge of the transactions or services to be provided by the Axitrader.

As a Professional Client a number of FCA rules will cease to apply. In particular:

Disclosures: You may not be given any of the additional disclosures required to be provided to Retail clients (for example on costs, commissions, fees and charges and foreign exchange conversion rates).

Appropriateness: Where we assess whether a product or service is appropriate for you, we can assume that you have the necessary level of experience and knowledge to understand the risks involved in relation to any investment, service, product or transaction.

Suitability: If we are ever required to assess the suitability of a personal recommendation to you or (if we are providing relevant investment advice), we can assume that you have the necessary experience and knowledge to understand the risks involved, and assume that you are able financially to bear any investment risks consistent with your investment objectives.

Order Execution: Our order execution requirements may differ between Professional and Retail clients.

Negative Balance Protection: You will not be covered by Negative Balance Protection.

Prompt Execution: We do not need to inform you of material difficulties we may have or encounter relevant to the prompt execution of your orders.

Financial Ombudsman Scheme (FOS): As a Professional Client, you may not have the right of access to the Financial Ombudsman Scheme, although if you are trading in a personal capacity you should be covered.