Best Professional Trading Accounts Compared & Reviewed

Professional Trading Accounts Explained

As trading has become more accessible to private clients the regulators (FCA & ESMA) have restricted how much leverage a retail client can have and also what products they can trade. However, if you are an experienced trader and still want to trade off reduced margin rates and want access to risker derivatives products like crypto, you can opt to upgrade your account to an elective professional.

It’s important to note that not everyone can elect to become a professional client. Only those clients with sufficient trading experience and understanding of the product can do so, both of which are validated by a quantitative and qualitative test by the broker.

Whilst it may look attractive as traders get to keep the previous levels of leverage, upgrading your classification comes with some hidden dangers that you should be aware of. It’s a broker’s responsibility to ensure you are fully informed of the protections you lose by upgrading.

Professional clients are deemed capable of making their own investment decisions. Criteria may change a little from platform to platform, but generally speaking you will need to have been working in a professional position in financial services for at least a year, have a portfolio of at least €500 and have a certain level of professional trading experience.

The difference between professional and retail status

The key differences between brokers offering professional trading accounts are:

• Margin rates
• Commission rates
• Spread width
• Additional/restricted market access
• Voice brokerage/personal account managers
• Commission reductions for professional trading accounts

What you typically lose as a professional trader

• Negative balance protection
• Funds not segregated
• Margin closeout at 50%
• Ability to use Financial Ombudsman Service
• Standardised risk warnings

Some professional trading accounts also offer rebates for higher-volume trading. Some may even offer a reduction in trading commissions for high volume accounts.

They may also differ in the amount of support they offer and the accessibility of their service. Because you’re classified as a professional investor, many firms may assume a certain level of knowledge on your part. This means the language may be more complicated and they may offer little in the way of tuition, or expert support.

Benefits of professional accounts

There are benefits to becoming a professional trader. These benefits can include;

• A reduction in margin rates
• Using collateral as margin
• Rebate on high trading volumes

You’ll be treated as someone who knows what they are doing and understands the risks they are taking on.

Dealer access

You’ll be given a dedicated client account manager and access to the latest and most sophisticated trading software. Most will also offer reductions on margin rates. Most importantly you’ll get better margin rates when trading CFDs or spread betting in a professional account.

Lower trading costs

The other main benefit is that your trading costs are lowered the more you trade. For high volume traders broker will offer a rebate on trading fees, which is essentially reducing your commission, if you put the volume through.

Collateral as margin

As a professional trader, you can use your longer-term investments as collateral for derivatives trading. This is generally restricted to professionals as it is not usually advisable using lower and medium-risk investments to cover the margin on short-term high-risk trading. There are circumstances when it is suitable, which we cover in our guide on using investments as collateral.

Better margin rates

Retail margin rates are capped by the FCA. One of the major benefits of a professional trading account is that you get increased leverage and reduced margins. This increases the amount of exposure you can have to the market, but it also increases the risk, and with it how much you could potentially lose.

Risks of professional accounts

As result a professional client, you’ll waive some of the FCA protections given to retail clients including:

• No negative protection
• No leverage or product restrictions
• Reduced client money segregation rules
• Assumption of increased experience by the brokers, so they won’t explain things in detail

No negative balance protection

Negative balance protection does not apply, so if your losses exceed your balance you could be in trouble.

With leveraged trading, it’s a significant risk that you could lose more than the funds you hold in your account. This is because you are essentially trading larger positions than your invested funds could normally afford. One of the key motivations behind installing Negative Balance Protection for retail traders is that it affords them greater protection against sharp market moves that are amplified by leverage. So it provides peace of mind to know that even though you deposited for example £2,000 in your trading account, you cannot lose more than that amount and end up owing the broker money.

No client money segregation

Additionally, retail clients have the ultimate protection in that firms are required by the FCA to fully segregate all retail Client Money in a trust account and not mix this with their own funds. The protection being that in the event a broker goes into liquidation, all retail client money is still safe and secure for the administrators to return back to clients. However, many brokers won’t segregate the funds of Elected Professional clients, meaning that if a broker goes bust, Elected Professional client funds are at significant risk.

Assumption of experience

If you become an elective professional trader your broker will assume you understand the risks, terminology and markets and will therefore be under less of an obligation to explain them to you.