Solving regulatory considerations for Leverage in the EU

It’s important to note that within the European Union (EU), the maximum allowable leverage for retail traders is typically limited to 1:30 under the European Securities and Markets Authority (ESMA) regulations. This means that the higher leverage of 1:500—which offers significant trading potential—can pose a challenge for traders operating under EU regulation, as they would not have access to such high leverage unless they qualify as professional traders, meeting specific financial and trading criteria.

However, there are alternatives for traders who wish to access higher leverage while remaining compliant with international regulatory standards. One option is to open a trading account with a broker regulated outside the EU, in jurisdictions where higher leverage is still permitted. These brokers operate under different regulatory frameworks, allowing traders to benefit from leverage options like 1:500.

Example of a Broker with Regulation Outside the EU. Link: ICTrading

That said, it is crucial to highlight that this information is provided to inform traders of available options, not to encourage or advise them to take specific actions. Each trader should carefully assess their personal circumstances, risk tolerance, and legal considerations before choosing a regulatory environment or trading strategy. While this route is available, it’s important to weigh the benefits and risks of trading outside the protective framework of EU regulation, particularly in terms of trader protections and dispute resolution mechanisms.

In summary, for those who wish to bypass the leverage restrictions within the EU, options do exist—but these should be carefully considered, especially for smaller traders who may find the additional risk a significant factor.

Legal Considerations for EU Citizens:

From a legal standpoint, EU citizens are not prohibited from opening accounts with brokers outside the EU, but they do so at their own risk. These brokers are not bound by EU investor protection rules, and in the event of a dispute, the trader may not have access to EU-based complaint mechanisms or compensation schemes, such as the Investor Compensation Scheme under national regulators.

Moreover, in some EU countries, national financial authorities may actively discourage or limit cross-border promotion of such offshore services. Traders should verify whether engaging with non-EU brokers could result in potential tax obligations, legal uncertainties, or limited legal recourse in case of fraudulent or misleading conduct.

That said, it is crucial to highlight that this information is provided to inform traders of available options, not to encourage or advise them to take specific actions. Each trader should carefully assess their personal circumstances, risk tolerance, and legal considerations before choosing a regulatory environment or trading strategy. While this route is available, it’s important to weigh the benefits and risks of trading outside the protective framework of EU regulation, particularly in terms of trader protections and dispute resolution mechanisms.

In summary, for those who wish to bypass the leverage restrictions within the EU, options do exist—but these should be carefully considered, especially for smaller traders who may find the additional risk a significant factor. Moreover, traders should be aware of the legal consequences and lack of protections when operating outside the scope of MiFID II and ESMA regulations.

Tomáš Bělák