Exclusive: GAIN Capital adds Mark Richards to its board, representing Michael Spencer’s IPGLAnother blow for Bitcoin – Stripe is dropping the “people’s currency”bitFlyer launches in Europe, becomes first bitcoin exchange to be regulated in JapanAquis Technologies to supply UBS MTF with surveillance & reporting solutionHow to master forex market structure in 3 simple stepsRival completes certification for Cboe Futures Exchange migration to Bats technology platformFICO partners with 4most Europe to accelerate banks’ regulatory complianceLuxembourg Stock Exchange partners with ADBC to expand the Green Bond MarketHKEX sets launch date for new securities trading systemAgency for the Cooperation of Energy Regulators extends its contract with NasdaqDeutsche Börse AG appoints Ingrid M. Haas as Managing Director of Communications and MarketingShenzhen Stock Exchange improves the risk management systemSeabury partners with Parabellum Markets for FX liquidity source in the AmericasSaxo Bank adds New York and London infrastructure to bolster FX Prime-of-Prime offeringMiFID II, GDPR and ESMA: The Not-So-Terrible TrioBlackwell Global Hong Kong acquires new SFC asset management licenseNasdaq elects Joseph Mecane to the Board of Directors of its U.S. ExchangesIG Group reports record 1H-2018 Revenue, establishes Germany sub ahead of BrexitBNY Mellon hires Michael Cooper from Deutsche Bank to head new institutional FX prime brokerage businessExclusive: Supreme Court rejects appeal against Israel Binary Options law

Social trading compliance in the EU

What are some of the platform features we can expect to see in the near future from regulation compliant social trading providers? Yael Warman, Content Manager at Leverate, takes a look in a special guest post.

If you also have an idea for a guest post on LeapRate – and want your article to be viewed by the hundreds of thousands of viewers who regularly visit our site and receive our daily email newsletter – please contact us at [email protected].


Social trading, or crowd trading as it is also known, has become incredibly popular, experiencing tremendous growth in recent years.

Yael Warman, Leverate
Yael Warman, Leverate

Social trading makes investing easier for traders as they can watch and copy the strategies of more experienced traders, effectively increasing their confidence and activity. In an era of heavy competition and rising acquisition costs, social trading has the potential to increase trader engagement and loyalty, which in turn increases lifetime value. The possibility for brokers to increase their conversion and retention rates and lengthen traders’ active time with the implementation of social trading tools, has spurred the number of new brokerages offering traders access to social trading platforms.

The power social trading may effect on the industry, especially the fact that traders may begin to blindly follow the strategies of other traders with little or no understanding of the potential risks involved, has caught the attention of regulators across Europe.

Various European regulatory entities, in their ambitious reaching powers over the financial sector, began tightening the reigns over social trading aspects of the Forex industry, a process which culminated with the decision by the Markets in Financial Instruments Directive, MiFID, followed by local jurisdictions across the EU, to regulate social trading under the same outlines as they do portfolio management.

As regulators become stricter in their enforcement of regulation over social trading operators, platforms are beginning to morph in order to become compliant. What are some of the platform features we can expect to see in the near future from regulation compliant social trading providers?

1. Regulation compliant social trading platforms will provide all the necessary tools needed by a brokerage’s portfolio manager in order for him/her to be able to screen new traders and help manage their risk.

2. An accompanying risk profile for every trader would allow them to make investment decisions based on their risk aversion and or tolerance. According to how the trader is categorized in terms of risk, the system will set appropriate stop loss levels and help traders manage their risk.

3. Reporting tools in order to comply with the regulators’ requirements will allow brokers to easily prepare reports to submit to regulatory entities.

4. As part of the risk management guidance, traders will be matched with masters that best match their risk profile and will be guided towards achieving greater diversity by delineating the amount of funds to be allocated to each master, each instrument and social trading versus traditional trading.

5. Pre-set warnings will be displayed for each trader who is about to reach certain risk thresholds.

6. Advanced social trading platforms will provide traders with greater choices of investment by way of a cross-community feature, in which traders can have access to masters and traders of other regulated social communities. Brokers will also be able to connect MAMs, hedge funds, portfolio managers, etc, to the platform, hence giving traders a wider range of investment options.

Related News

  • Steve K

    It’s about time regulators crack down on copy trading, auto trading, social trading, all that stuff. Without oversight it’s just asking for trouble and for scammers to take advantage of retail traders who don’t know any better.


Social trading compliance in the EU


Send this to a friend

Subscribe to LeapRate
Fill out the form below for more information
for lising in LeapRate's Forex Yellow Pages

Please enter the company name, email address to reach you and phone # (optional):

Please fill out the message field to the right for any questions or special inquiry: