Trading Safety of Clients’ Funds

Safety of Clients’ Funds

The Safety of Client Funds is our Top Priority

We at Purple Trading believe that the most important elements in providing financial services are safety and reliability. And we are confident that this is definitely something where you can see the real added value in Purple Trading.

Supervision of external providers

This is our legal infrastructure, in which trusted external bodies provide supervision and protection of client funds on various levels. Traders and Investors can therefore feel safe trading under Purple’s robust framework of fund protection, which our competitors do not offer.

Negative balance protection

The purpose of negative balance protection is to protect a retail client who may find himself in a non-standard situation in which there is a sudden change in the price of the underlying asset, to such an extent that the margin stop-out ceases to function properly and there is no automatic closing of trading positions. This phenomenon can occur especially during the publication of important macroeconomic reports and external shocks, which result in increased volatility.

The main function of negative balance protection is to ensure that the trader's maximum loss at Purple Trading does not exceed the total capital in the trading account. This protection also accounts for gains from the closing of open positions in a given account which have not yet been closed.

The investor/trader should not face any additional responsibilities arising from his/her trading activities. Negative balance protection is required of all brokers as per ESMA & CySEC guidelines and as such is provided without exception on all leveraged products.

Financial leverage at Purple Trading

How it works

Let's say you're a retail client with 10,000 EUR in your trading account.
After opening a few trading positions, your free margin is at 2000 EUR. Because in Purple Trading we the stop-out level for retail clients to 50%, which means that your position will close automatically if your account balance reaches 1000 EUR.
Financial markets can be unpredictable, so an unexpected trend may change and the price of an underlying asset with huge volatility will quickly approach your stop out.
Price gaps and lack of liquidity can prevent you from fulfilling a trading order, so you must be careful in this case. Thus, a trader facing the above may find himself in a position where all of his/her balance is in the red even though an automatic stop-out has been initiated.
Fortunately, the negative balance protection automatically resets the negative balance without any legal obligation on the trader’s part. This means a trader will not have to pay anything out of his/her own pocket.

We practice Good Corporate Governance

We take our obligations as holders of Financial Services Licence very seriously. Besides conducting regular independent external audits of the financial and compliance arrangements to ensure regulatory compliance we are also in good standing with all the regulators. Purple Trading has no regulatory or judicial findings against it from any financial regulator, government body, or court of law.

Secure Business Model

As a client of Purple Trading, you can count on the fact that you trade with a 100% pure STP / No Dealing Desk / Agency model broker. This means that we are in no way, shape, or form affected by your profits or losses.

By having our license issued by CySEC (Cyprus Securities and Exchange Commission) we are authorized to operate exclusively on an STP model. Purple Trading is monitored not only by the CySEC but also by an internal auditor, an external auditing firm, and by the Board of the Company. All these subjects make sure that we are operating within the boundaries of our license.

In a nutshell, brokers who are functioning on the Market Maker model (MM) are usually generating profits whenever their clients are at loss and vice versa. This means that their revenue model revolves around the profit and losses of the client’s funds. Purple Trading is NOT a MM which means that any profitable clients who are serious about trading and investing in the financial markets are more than welcome to join us. Our setup eliminates any conflict of interest to our clients and provides for a fair “no bullshit” trading environment.

Differences between STP and MM brokers

Segregated Client Funds

Compliant to legislative acts of the EU and the strict regulations of the Republic of Cyprus, Purple Trading segregates its client’s funds. Therefore, in the unlikely event of Purple Trading (L.F. Investment Ltd.) being subjected to financial liability, our client’s funds will stay safe and will not be affected in any way thanks to their legal protection.

Each year, Purple Trading safety measures, regarding the segregated client funds, undergo thorough internal and external audits to ensure that every precautionary measure is sufficient and that client funds are legally protected. This only shows that when it comes to our client’s funds, we make sure to stick to the meticulously structured security plan.

Investor Compensation Fund (ICF)

Purple Trading (L.F. Investment Ltd.) is a member of the Investor Compensation Fund (“ICF”), which is a regulatory requirement under the Provision of Investment Services, the Exercise of Investment Activities, the Operation of Regulated Markets and Other Related Matters Law 144(I)/2007, as subsequently amended from time to time.

Although it would be in the rare instance that clients of Purple Trading may require it, considering the two aforementioned factors (business model and segregation of funds), it means that our Retail Clients are also protected by this Investor Compensation Fund (ICF) for up to EUR 20,000 of their funds by the Cypriot law against bankruptcy. Further information is available on the official web page of CySEC.

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Frequently asked questions

How are the margin call and the stop-out levels set? How do they work?

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Margin call level is set up to 100% of the used margin (the equity of the account is equal to the used margin). If the margin level drops to this value, the client is notified to fund his account to keep the positions open or to be able to open new trades. Notification is displayed directly in MT4 and cTrader and at that moment it is not possible to open another trading position. The stop-out level is set to 50%. If margin level falls to this level, MT4 or cTrader server automatically closes the trading position, which is in the biggest loss, until the margin level is again at least 50%.

What is market maker broker, Is Purple Trading market maker, what is the difference between STP and market maker broker.

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Market maker broker is an individual market participant, that quotes buy and sell prices on its own. Market maker broker is on the opposite side of each trade. The goal of market maker broker is to make a profit on their clients based on a spread and the price of the instrument, that he creates.

STP broker is not an individual market participant. All orders are routed to the brokers' liquidity providers, therefore, he is not on the opposite side of the trade and he is not creating prices by himself.

Purple Trading is an STP broker. As we believe that this is the right way to ensure a transparent and fair environment for all of our clients.

What is the difference between STP and ECN account?

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STP account has no commission charged per trade, but there is a higher spread compared to the ECN account.
The spreads are lower for the ECN account - from 0.1 pip + fixed commission 10 USD / 1 round-turned-lot / trade. For lower trading volume, the commission is charged proportionately, e.g. 1 USD/0.1 lot/trade.

The first trading account that is automatically opened to a client is in ECN account type.
Commission and spread may be lower within our Trader Status loyalty program.

Financial leverage

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A mechanism which enables traders to trade larger amounts even with smaller volume of free capital which would otherwise be insufficient for the trade, e.g., when trading 1 lot of currency pair EURUSD with leverage of 1:100, the client has to have at least 1,000 EUR of free capital on his/her trading account. Should the leverage not be used in this scenario, the client would need to have 100,000 USD on his/her trading account to cover the entire traded volume.

Liquidity

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Broker’s ability to fill client’s order in the market at the desired value and in the desired volume.

Margin - margin requirement

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It is the free capital which client has to have available on his/her trading account in order to be allowed to open a specific trading position. The volume of the required margin for currency pairs is related to the financial leverage. For CFD instruments the margin requirements are implemented directly and they are not related to the leverage.

Stop-out

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A protective order activated when client’s Equity on his/her trading account decreases to half of the required margin. Trading positions are then automatically closed starting from the one with the biggest loss until there is enough free funds to keep the account’s Equity over 50% of the required margin.

Safety of Clients’ Funds

The Safety of Client Funds is our Top Priority

Supervision of external providers

Negative balance protection

How it works

We practice Good Corporate Governance

Secure Business Model

Segregated Client Funds

Investor Compensation Fund (ICF)

Open an account and trade with us!

Frequently asked questions

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