Comparison of client’s profitability among European brokers 2023

The requirement for EU-regulated brokers to disclose data on the percentage profitability of client accounts isn't a novel practice. This mandate, enforced by the European Securities and Markets Authority (ESMA), ensures transparency in reporting. The compulsory disclosure of client account profitability serves as a protective measure for retail traders and investors, providing them with an additional and crucial metric to evaluate when selecting their broker.

How to determine the profitability of a broker’s clients?

The table below has been compiled from a comparison of publicly accessible data regarding the retail CFD accounts' loss rate percentages for the year spanning from January 1, 2023 to December 31, 2023. This metric is a mandatory publication for all brokerage firms operating within the EU. Typically, you can find this information in the footer of their websites or as part of disclaimers in various online marketing materials such as banners, emails, and ebooks.

If you're unable to locate this information with your broker, it's likely that they are not regulated under European jurisdiction, or you might be dealing with an off-shore version of their services. It's important to note that many brokers offer their services in both the European and off-shore markets.

How does EU regulation protect traders?

Numerous aspects of regulation directly impact a broker's client, but we will focus on those most crucial and beneficial for traders. At Purple Trading, being regulated by CySEC in Cyprus, which is under the European ESMA's purview, ensures that all these vital guarantees are upheld for our clients.
 

Negative balance protection

As we've noted before, the unpredictability of markets means that traders can sometimes lose more money than the total balance in their trading account, often due to unforeseen market volatility coupled with the use of leverage. However, when trading with a broker regulated within the EU, there's no risk of falling into debt. Thanks to ESMA (European Securities and Markets Authority) regulations, retail traders are protected from losing more money than the amount they have deposited in their accounts.
 

Segregation of client bank accounts

If you have concerns about your capital being misused by your broker for internal enrichment or to cover operational costs, the following information should provide reassurance. ESMA mandates that brokerage firms operating in the EU must keep all client funds in separate bank accounts, distinctly segregated from the firm's own funds. Additionally, these funds are insured against the firm's failure. So if you see a disclaimer from your broker about the loss-making nature of its clients, you can rest assured that your broker is regulated and therefore there’s next to zero chance of possible embezzlement.
 

Disclosure of profitability of client accounts

Every 3 months, brokerage companies must publish the loss rate of their clients' trading accounts. This is stated as a percentage and is placed in small print on each advertising banner, image, or other promotional material. You can also find it in the footer on the brokers' websites in the disclaimer.
 

_{Disclaimer indicating the loss rate of the broker's client accounts located in the footer of the website (source: Purple Trading)}

_{Some brokers also place disclaimers in pop-up windows on their websites (source: Purple Trading)}