To operate in various jurisdictions, brokers have to adjust their business models to the requirements of local regulators. Regular updates or simultaneous operation in several regions may complicate routine platform maintenance. Moreover, the native functionality of trading platforms does not always ensure compliance with specific requirements.
Brokers may use additional software to fine-tune the trading platform and configure all groups and servers for trading under certain jurisdictions. This digest briefly answers the most popular questions about additional software for MT4 and MT5 that may be needed for operating in different regions.
France: AMF margin requirements
AMF or Autorité des marchés financiers is the French regulatory authority that sets special margin requirements to protect traders from high-risk trading strategies. According to these requirements, brokers should ask traders to specify stop-loss levels before opening a position–a restriction that requires additional software.
Special plugins like Custom Margin can help brokers meet these requirements. The plugin changes default margin calculation for specific accounts or groups, making it equal to the maximum loss for a particular trade.
Europe: ESMA negative balance protection
The ESMA, a European markets authority, obligates brokers operating in its area to protect clients from trading with a negative balance. To understand how traders’ balance may drop below zero and how brokers may technically ensure accounts’ protection, consider a basic scenario.
A trader may accumulate a large exposure by using credit funds like leverage or bonuses. Under such conditions, even a small price change may significantly affect a leveraged account and reach a negative balance. There are two general plugins that can help avoid such situations:
– Plugins like Negative Balance Protection operate with accounts that have already dropped to below-zero balance and perform balance operations to return the balance to zero.
– Solutions like Margin-Credit Tracker provide negative balance protection by removing credit funds to prevent a minus or make a margin call earlier.
Europe & Australia: Custom Leverage Measures
Some regulators like the ASIC and the ESMA have special requirements for the size of leverage that a broker can provide to clients. Originally initiated by the ESMA in 2018, it concerned primarily trading instruments with increased volatility, such as CFD and binary options. Afterward, this practice of introducing tight leverage was adopted by other regulatory authorities.
The above restriction became especially worrying for brokers using MetaTrader 4, which doesn’t allow users to customize leverage’s ratio. The most convenient way to overcome this obstacle is plugins like Dynamic Margin and Leverage, which expand the functionality of the trading platform to set custom leverage value.
MENA: Islamic Accounts
It may be crucial for brokers to provide Islamic accounts in specific regions. The key feature of such accounts is the ability to trade under Riba principles of Sharia law that forbids “interest” credited from loans or deposits.
Swaps in their nature are “interest” paid for overnight rollover. To provide trading services to observant Muslims, brokers may introduce swap-free accounts, i.e., Islamic accounts, where a flat-fee handling charge for overnight positions is specified instead of charging interest.
To efficiently configure these accounts, brokers may use Swap Manager, which allows them to fine-tune swaps for specific groups and symbols.
Reporting requirements
Sometimes regulators ask brokers to collect specific information about clients’ trading expenses. Such data may not be directly available on trading platforms, especially when working with third-party solutions. Based on the data required, brokers may choose plugins to generate these reports, like Execution Report, which calculates traders’ expenses on a spread.
Additional plugins that may be helpful
There are plugins with more general functionality that could help to operate in different jurisdictions.
Custom Restriction allows limiting the amount of traders’ simultaneously opened positions. This way, brokers may protect clients from high-risk trading strategies.
Restricted Manager controls and limits managers’ trading activity. For example, the plugin can forbid managers to place new order requests for a symbol that is unavailable for clients or activate pending orders with off-market prices.Check out our blog posts on essential plugins for MT4 and MT5 to learn more about other technological solutions that could help make your business more efficient.
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