How has the pandemic affected the development of investing in Poland? Are investors still interested in currencies, or are they looking for broader investment opportunities? In what direction is the FX/CFD industry in Poland changing? Answers to these and other questions can be found in an interview with Maciej Wojciechowski, Business Development & Brand Manager at Purple Trading, who talks about changes in the investment industry over the past decade, the growing number of retail investors in Poland, and investor interest in a wide range of assets, including foreign stocks. Wojciechowski also discusses the introduction of new regulations aimed at protecting investors and avoiding fraud and crime in the FX/CFD industry.
How the Polish FX/CFD industry changed over the past decade ?
At the outset, I would like to point out that it is perfect question because my career in the investment industry, including the FX/CFD market, began nearly 10 years ago, and from my own experience I have observed these significant changes on an ongoing basis.
Regarding the first question, the FX/CFD industry in Poland has undergone significant changes in the past decade, which have improved investor safety, established guidelines and sanctions for brokers, and curtailed fraudulent activities.
The last decade has undoubtedly been a development of financial awareness among traders and educational elements through educational campaigns, numerous webinars/conferences such as Invest Cuffs, and from the perspective of my company, projects such as Purple Trading Hub.
Key events in the past decade include:
- Ban on trading and promoting binary options.
- IMIFID II in 2018, which increased investor protection in capital markets and aimed to bring more transparency to the market.
- ESMA Product Intervention in 2018, which limited the level of financial leverage for retail clients to 1:30.
- The decision of the Polish Financial Supervision Authority “KNF” in 2019 to introduce the status of Experienced Client.
Are investors still interested in the offer of currency pairs at all, or rather do they want to invest in a wide range of assets, including stocks (not only Polish but also foreign ones)?
Recently, there has been a growing interest among investors in a wide range of assets, including foreign stocks. The increasing popularity of investing in foreign stocks stems from the opportunity to diversify portfolios and the possibility of achieving higher returns by participating in the global stock market.
A very good example of this is ETFs/index funds based on global stock indices such as MSCI ACWI.
Of course, a significant outflow of volume has also affected the Crypto market. However, in the case of currency pairs, they still remain an important element of trading on the forex market and are popular among investors who use them for speculative or hedging transactions. I believe that this situation will not change quickly.
In recent years, the number of retail investors in Poland has been growing. Did the Covid-19 pandemic have an impact on this trend? What could be other reasons for this state of affairs?
The pandemic and its repercussions are absolutely one of the factors that significantly increased the number of retail investors in Poland, up to a record year of 2022 with over 143,000 active traders (based on a publication by UKNF).
Other factors include high inflation, weakening purchasing power of money, and a certain crisis of trust in the banking sector and investment products burdened with high margins. Therefore, retail investors constantly seek alternative products or services for capital investment.
The sudden increase is also linked to the increasing awareness of society, the level of financial education. However, we are still far from the level of capital investment on the stock market as in the USA or Australia, although this is undoubtedly a good trend.
In the CEE region, is Poland the leader in the FX/CFD market? How do other countries perform based on your experience?
Poland is definitely a leader both in terms of the number of clients and transaction volume, serving as a hub in the Central and Eastern Europe region. The number of investment conferences, both online and offline, contributes to building awareness among retail clients as well as trading skills. From my knowledge, the Czech Republic and Slovakia is on second place .
Do you expect that the European Union may ban FX/CFD trading for retail investors in the future? If so, what will brokers do then?
Personally, I don’t see any grounds or reasons why the EU would ban retail trading of FX/CFD in the future. The industry has become heavily supervised and regulated over the past decade, and new guidelines and product interventions build trust in brokers and brokerage firms that offer these financial products. The safety of having a trading account is not significantly different from having a bank account, and often opening such an account requires providing more documents for verification and KYC.
Of course, nothing can be completely ruled out, but the further development of the industry, its safety, and transparency should promote further growth in the offer and education of retail clients. If such a direction were chosen, investing in real estate, cryptocurrencies, retail stocks, or ETFs could also be banned. Every financial instrument involves risk, and it is up to us individually how we will manage it.
What asset class was the most popular among retail investors in 2022, and what will be the most popular in the current year?
Based on data from Purple Trading, I can say that in terms of percentage composition for 2022, the top 3 financial instruments among retail investors were:
EUR/USD currency pair – 26% of total trading volume
Dax 40 index – 16%
NSDQ index – also 16%
In 2023, I would add gold and biotech stocks, which are currently undervalued sectors.