Elective Professional Client

An elective professional client is a retail client who has asked to be reclassified as professional and whom the firm has assessed as meeting the tests for it. Under the MiFID framework and its UK equivalent the quantitative side requires at least two of three conditions: trades of significant size at significant frequency in the relevant market over the previous four quarters, a financial instrument portfolio above a stated threshold, and at least a year in a professional role in the financial sector requiring knowledge of the transactions concerned. The firm must separately satisfy itself that the client understands the risks being taken on, and the request has to be made in writing. The reason retail traders pursue it is leverage, because professional clients sit outside the retail leverage caps. What is handed back in exchange is the protection package those caps arrived with, which depending on the entity and jurisdiction can include negative balance protection, standardised risk warnings, the margin close-out rule, restrictions on incentives, and access to the ombudsman and compensation schemes. So the question to ask before opting up is not what leverage is gained but which named protections that specific entity stops applying.