eToro is all about trading online simply and safe. Learn about eToro's international trading brokers and regulations
eToro’s customers enjoy the financial services of respectable and regulated brokers
around the globe. We insist on the highest standards so that our customers can be
sure that they are trading through reliable and professional partners and liquidity
providers under strict official regulations.
Clients from Asia Pacific can trade with the eToro platform through IC Markets Ltd,
a licensed financial services firm in Australia, regulated by ASIC, the financial
services regulating body in Australia under license number AFSL 335692.
eToroUSA is operated by Tradonomi LLC, which acts as an introducing broker to Institutional Liquidity (ILQ). Both eToroUSA and ILQ are regulated by the Commodity Futures Trading Commission (CFTC) and are members of the National Futures Association (NFA). eToroUSA operates under NFA member ID 0382918. ILQ’s NFA member ID is 0367140.
MiFID (Markets in Financial Instruments Directive) is a European Union law effective
as of 1 November 2007, which provides a harmonized regulatory regime for investment
services across the European Economic Area. The main objectives of the Directive
are to increase competition and client protection in investment services. eToro
(Europe) Ltd. activities and services comply with MiFID requirements. All company’s
documentation and procedures are consistent with MiFID rules.
1.1 eToro (Europe) Ltd (the “Company”) is an Investment Firm regulated by the Cyprus Securities and Exchange Commission (“CySEC”) with license number 109/10.
1.2 This Policy is issued pursuant to, and reflects Compliance with, the European Directive 2004/39/EC Of 21 April 2004 on Markets in Financial Instruments (MiFID) and with the implementation in Cyprus legislation on Investment Services and Activities and Regulated Markets Law of 2007 – Law 144(I)/2007 (the “Rules”) that apply to the Company. It is not intended to create third party rights or duties that would not already exist if the policy had not been made available and it does not form part of any contract between the Company (or any of its affiliates) and any client or prospective client.
1.3 What follows is an overview on how trades and orders are executed, the factors that can affect an execution’s timing and the way in which market volatility plays a part in handling orders when buying or selling a financial product.
1.4 Upon acceptance of a client order and when there is no specific client instruction regarding the execution method, the Company will endeavor to execute that order in accordance with the Best Execution policy.
1.5 Nevertheless, whenever there is a specific instruction from a client, the Company shall execute the order following the specific instruction. In fact, any specific instructions from a client may prevent the Company from taking the steps that it has designed and implemented in the execution policy to obtain the best possible result for the execution of those orders in respect of the elements covered by those instructions.
1.6 This Policy is available to clients upon request and is also made available on our Website. The Company reserves the right to amend or supplement this Policy at any time.
2. FINANCIAL PRODUCTS TO WHICH THIS POLICY APPLIES
2.1 The financial products to which this Policy applies are all of the products offered by the company. Different execution methodologies may apply to different products.
2.2 The trading conditions of the above products are available on the Company’s official web site at www.etoro.com.
3. COMPANY’S APPROACH TO BEST EXECUTION
3.1 The Company identifies and seeks to obtain the most favorable terms reasonably available when executing an order on behalf of a client.
3.2 To do this, the Company relies on three basic components:
state‐of‐the‐art technology for routing, monitoring and executing orders;
careful consideration of the elements of order execution;
regular and rigorous examination of the overall execution quality.
3.3 When executing a buy or sell order, the Company always considers:
the classification of the client as retail or professional;
the nature of the client order;
the characteristics of the financial instruments that are subject to that order;
4. THE ROLE OF TECHNOLOGY IN EXECUTING CLIENTS’ ORDERS
4.1 Typically, the Company uses automated systems to route and execute client orders. With respect to certain instruments, such as securities and BitcoinCFD (such as shares, stocks, BitCoin, BitCoin derivatives, bonds and/or other debt instruments, including government and public issues). The execution is not effected automatically but rather in one or more intervals each trading day (as shall be elected by the Company), on the basis of best prices available to us from our liquidity providers along with our markup. Unless otherwise specified in the products description, when clients’ orders are received by the Company, it is automatically executed.
4.2 For OTC financial instruments and/or financial instruments whose underlying asset is a OTC financial instrument (such as securities CFDs), the Company may trade against its own proprietary desk or will route the orders to other market maker firms. Many of these firms also provide automated executions of orders.
5. THE ELEMENTS OF OUR BEST EXECUTION POLICY
5.1 Routing determinations are based on five main criteria and are regularly reviewed by the Company. Hence to determine the best way to execute an order for a client the Company takes into consideration:
(1) Speed and Likelihood of the Execution. Due to the levels of volatility affecting both price and volume, the Company seeks to provide client orders with the fastest execution reasonably possible.
(2) Price Improvement and Overall Consideration of Costs. Orders are routed to market makers and/or market centers where opportunities for price improvement exist.
(3) Size Improvement. In routing orders, the Company seeks markets that provide the greatest liquidity and thus potential for execution of large orders.
(4) Overall Execution Quality. When determining how and where to route or execute an order, the Company’s traders draw on extensive day‐to‐day experience with various markets and market makers, focusing on prompt, sequential and reliable execution.
(5) Clients’ specific instructions. The Company will always execute client orders in accordance with the instructions given by that client or on its behalf. Consequently, if a client requires an order to be executed in a particular manner and not in accordance with the Company’s best execution principles set forth herein, the client must clearly state his/her desired method of execution when he/she places the order. To the extent that a client instruction is not comprehensive, the Company will determine any non‐specified components of the execution in accordance with these best execution principles.
The above execution factors may not apply or may partially apply to financial instruments which are not, by their terms executed immediately, such as securities’ CFDs. Such instruments are executed in specific one or more intervals each trading day. Further details on how we execute the orders with respect to such financial instruments are available on the Company’s official web site at www.etoro.com.
5.2 The Company invites the clients to bear in mind that the duty of best execution not only relates to price but also involves the consideration of various factors including cost, speed and likelihood of execution and settlement. Even if a trade appears not to have been executed at the best possible price, it does not necessarily constitute a violation of the duty of best execution.
6. REGULAR REVIEW OF EXECUTION QUALITY AND OF EXECUTION VENUES
6.1 The Company regularly evaluates the overall quality of its order executions. The Company studies the quality of executions for listed and OTC retail market orders.
6.2 The Company’s Management periodically evaluates the execution quality and makes recommendations regarding order routing practices.
7. EXECUTION VENUES CURRENTLY CHOSEN
7.1 Execution Venues are the entities with which the orders are placed or to which the Company transmits orders for execution. For the purposes for the financial instruments provided by the Company, the Company acts as the Sole Principal and is always the sole Execution Venue of the Clients orders. ;
7.2 The Company acknowledges that the transaction entered in Financial Instruments with the Company are not undertaken on a recognized exchange, rather they are undertaken through the Company’s trading platform, and accordingly, they may expose the Client to greater risks that regulated exchange transactions. Therefore the Company may not execute an order, or it may change the opening (closing) price of an order in case of any technical failure of the trading platform or quote fees. The Client is obliged to close an open position of any given Financial Instruments during the opening hours of the Company’s Trading platform. The Client also has to close any position with the same counter party with whom it was originally entered into, thus the Company.
7.3 The Company places significant reliance to the above execution venue(s) based on the above mentioned factors and their relevant importance. It is the Company’s policy to maintain such internal procedures and principles in order to act for the best interest of its client and provide them the best possible result (or “best execution”) when dealing with them.
8. PRICE VOLATILITY
8.1 In order to minimize such a risk, the Company has in place procedures and arrangements which to the furthest extent possible provide for the prompt, fair and expeditious execution of client orders.
9. EFFECTS ON ORDER EXECUTION
9.1 Clients should be aware of the following risks associated with volatile markets, especially at or near the open or close of the standard trading session:
Execution at a substantially different price from the quoted bid or offer or the last reported sale price at the time of order entry, as well as partial executions or execution of large orders in several transactions at different prices.
Opening prices that may differ substantially from the previous day’s close.
Locked (the bid equals the offer) and crossed (the bid is higher than the offer) markets, which prevent the execution of client trades.
10. ALTERNATIVE TYPES OF ORDERS
10.1 Given the risks that arise when trading in volatile markets, you may want to consider using different types of orders to limit risk and manage investment strategies.
(1) Market order. With a market order the client instructs a broker to execute a trade of a certain size as promptly as possible at the prevailing market price. Financial institutions are required to execute market orders without regard to price changes. Therefore, if the market price moves significantly during the time it takes to fill a client’s order, the order will most likely be exposed to the risks outlined above, including execution at a price substantially different from the price when the order was entered.
(2) Limit order. With a limit order, the client sets the maximum purchase price, or minimum sale price, at which the trade is to be executed. As a limit order may be entered away from the current market price, it may not be executed immediately. A client that leaves a limit order must be aware that he/she is giving up the certainty of immediate execution in exchange for the expectation of getting an improved price in the future. Limit orders may be routed to an exchange without human intervention.
a) eToro (Europe) Ltd. or that person is likely to make a financial gain, or avoid
a financial loss, at the expense of the Client
b) eToro (Europe) Ltd. or that person has an interest in the outcome of a service
provided to the Client or of a transaction carried out on behalf of the Client,
which is distinct from the Client’s interest in that outcome
c) eToro (Europe) Ltd. or that person has a financial or other incentive to favour
the interest of another Client or group of Clients over the interests of the Client
d) eToro (Europe) Ltd. or that person carries on the same business as the Client
e) eToro (Europe) Ltd. or that person receives or will receive from a person other
than the Client an inducement in relation to a service provided to the Client, in
the form of monies, goods or services, other than the standard commission or fee
for that service
a) Effective procedures to prevent or control the exchange of information between
relevant persons engaged in activities that may cause a conflict of interest where
the exchange of that information may harm the interests of clients.
b) The separate supervision of relevant persons whose principal functions involve
carrying out activities on behalf of, or providing services to, clients whose interests
may conflict, or who otherwise represent different interests that may conflict,
including those of eToro (Europe) Ltd.
c) The removal of any direct link between the remuneration of relevant persons engaged
in one activity and the remuneration of, or revenues generated by, different relevant
persons principally engaged in another activity, where a conflict of interest may
arise in relation to those activities.
d) Measures to prevent or limit any person from exercising inappropriate influence
over the way in which a relevant person carries out investment services or activities.
e) Measures to prevent or control the simultaneous or sequential involvement of
a relevant person in separate investment or ancillary services or activities where
such involvement may impair the proper management of conflicts of interest.
(a) The Cyprus Securities and Exchange Commission has determined that eToro (Europe)
Ltd. is for the time being unable to meet its obligations arising from its investors-customers’
claims, in connection with the covered services it has provided, as long as such
inability is directly related to eToro (Europe) Ltd.’ financial position which has
no realistic prospect of improvement in the near future; OR
(b) A Court, based on grounds directly related to the financial position of eToro
(Europe) Ltd., has made a ruling which has the effect of suspending the investors-customers‘
ability to lodge claims against eToro (Europe) Ltd..
1.1 Credit Risk
Credit Risk arises when failures by counterparties to discharge their obligations could reduce the amount of future cash inflows from financial assets on hand at the balance sheet date.
The Company has no significant concentration of credit risk and implements the standardised approach for credit risk.
Cash balances are held with highly rated financial institutions and the Company has policies in accordance with the relevant legislation, to limit the amount of credit exposure to any financial institution. The company also developed internal policy which reviews on weekly basis and examine the rates of the financial institutions and limit its assets according to the risk rate of the institutions. The risk of material credit loss due to a default of these credit institutions is quite low, based on the relevant calculations in the Company’s capital requirements.
Further to the above the Company has policies to diversify risks and to limit the amount of credit exposure to any particular counterparty in compliance with the requirements of the CySEC Directive DI144-2007-06.
The Company uses the Standardized Approach to Credit Requirements for the calculation of its credit risk.
1.2 Operational Risk
Operational risk means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Operational risk includes legal risk but excludes strategic and reputational risk.
The following list presents some event types, included in operational risk, with some examples for each category:
The Company manages operational risk through a control-based environment in which processes are documented and transactions are reconciled and monitored. This is supported by continuous monitoring of operational risk incidents to ensure that past failures are not repeated.
For the calculation of operational risk in relation to the capital adequacy returns, the Company uses the Basic Indicator Approach.
1.3 Foreign Exchange Risk
Foreign exchange risk is the effect that unanticipated exchange rate changes have, on the Company.
In the ordinary course of business, the Company is exposed to minimal foreign exchange risk, which is monitored through various control mechanisms.
The foreign exchange risk in the Company is effectively managed by setting and controlling foreign exchange risk limits, such as through the establishment of maximum value of exposure to a particular currency pair as well as through the utilization of sensitivity analysis. The Company is mainly exposed to the fluctuation of the Euro versus the United States Dollar (USD), due to the fact that Major Company’s assets are denominated in Euro whereas the reporting currency is the USD.
The Risk Manager monitors these risks with the assistance of the accounting function and based on the fluctuation of the relevant exchange rates, the necessary hedging activities are undertaken.
1.4 Interest Rate Risk
Interest rate risk is the risk that the value of financial instruments (including currencies) will fluctuate due to changes in the market interest rates. The Company is exposed to interest rate risk in relation to its bank deposits.
However, the Company’s income and operating cash flows are substantially independent on changes in market interest rates due to the fact that the Company, other than cash at bank which attracts interest at normal commercial rates, it has no other significant interest bearing financial assets or liabilities.
Nonetheless, the Risk Manager monitors these risks with the assistance of the accounting function and based on the fluctuations of the relevant rates, the necessary hedging activities are undertaken. The review is being done on weekly basis by the accounting function
During 2012, the interest rate risk has been minimal, due to the generally low level of key interest rates such as those set by the United States Federal Reserve and the European Central Bank, in addition to the fact that these levels have not fluctuated significantly during the period under review.
1.5 Funding Liquidity Risk
Funding liquidity risk is the possibility that, over a specific horizon, the Company will be unable to meet its demands/needs for money (i.e. cash) through mismatch of assets and liabilities. During the period under review, the Company was not exposed to funding liquidity risk.
Policies and procedures for the measurement and management of the Company’s net funding position and requirements, on an on-going and forward-looking basis, have been established in order to mitigate the funding liquidity risk. Furthermore, the Company has considered, alternative scenarios and the assumptions underpinning decisions concerning the net funding position were reviewed regularly by the Risk Manager.
1.6 Money Laundering and Terrorist Financing Risk
Money laundering and terrorist financing risk mainly refers to the risk that the Company may be used as a mean to launder money and/or finance terrorism. The Company has established policies, procedures and controls in order to mitigate the money laundering and terrorist financing risks.
1.7 Compliance Risk
Compliance risk is the current and prospective risk to earnings or capital arising from violations of, or non-conformance with, laws, bylaws, regulations, prescribed practices, internal policies, and procedures, or ethical standards. This risk exposes the Company to financial loss, fines, civil money penalties, payment of damages, and the voiding of contracts. Compliance risk can lead to diminished reputation, reduced Company value, limited business opportunities, reduced expansion potential, and an inability to enforce contracts. In general the Company has enhanced the compliance of all departments according to regulatory requirements.
Compliance risk is limited to a significant extent due to the supervision applied by the Compliance Officer, as well as the monitoring controls and systems applied by the Company.
1.8 Reputation Risk
Reputation risk is the current or prospective risk to earnings and capital arising from an adverse perception of the image of the Company by Clients, counterparties, shareholders, investors or regulators. Reputation risk could be triggered by poor performance, the loss of one or more of the Company’s key directors, the loss of large Clients, poor Client service, fraud or theft, Client claims, legal action, regulatory fines and from negative publicity relating to the Company’s operations whether such fact is true or false.
The Company has policies and procedures in place when dealing with possible Client complaints in order to provide the best possible assistance and service under such circumstances. The possibility of having to deal with Client complaints is low, compared to the high amount of the Company’s Clients, as the Company does its best to provide high quality services to its Clients and has the appropriate procedures in place. In addition, the Company’s Board members and Senior Management is comprised of experienced professionals who are recognized in the industry for their integrity and ethos, and, as such, add value to the Company.
In the few occasions which the Company had dealt with Client complaints, the Company has successfully resolved the relevant complaints.
1.9 Online Fraud
Online fraud could occur when Clients illegally use the credit cards or other online payment methods of others in order to fund their accounts with the Company. This risk exposes the Company to monetary loss and to potential implications with the credit cards’ issuers.
The Company has developed robust risk management technology to identify fraudulent transactions. To this end, the Company employs the Risk Rule Engine Alerting and Flagging System to prevent and identify online fraud.
Following an alert/flag by the Company’s Risk Rule Engine Alerting and Flagging System, the Company investigates the relevant account(s) to establish whether the transaction(s) in question are indeed fraudulent. In case the Company establishes that fraud activity has been performed, the Company then refunds the funds to the original mean of payment (i.e. to the real payment account holder).
In addition Credit card issuers have adopted credit card security guidelines as part of their on-going efforts to prevent identity theft and credit card fraud. The Company continues to work with credit card issuers to ensure that its services, including customer account maintenance, comply with these rules. There can be no assurances, however, that the Company’s services are fully protected from unauthorized access or hacking. When there is unauthorized access to credit card data that results in financial loss, there is the potential that the Company could experience reputational damage and parties could seek damages from the Company.
1.10 Information Technology Risk
Information Technology (hereinafter, “IT”) risk could occur as a result of inadequate information technology and processing, or arise from an inadequate IT strategy and policy or inadequate use of the Company’s IT. Specifically, the company recruited an IT Manager, policies have been implemented regarding improved backup procedures, these now include 3 levels of back up, full site replication of trading systems, software maintenance, hardware maintenance, improved security policies and training, use of the internet, anti-virus procedures and monitoring systems.
Materialization of this risk has been minimized to the lowest possible level.
3.1 Remuneration System
The following is applicable with regards to the Company’s remuneration system:
The Company's remuneration system and policy is concerned with practices of the Company for those categories of staff whose professional activities have a material impact on its risk profile, i.e. the Senior Management, members of the Board of Directors and the Heads of the departments; the said practices are established to ensure that the rewards for the ‘executive management’ are linked to the Company’s performance, to provide an incentive to achieve the key business aims and deliver an appropriate link between reward and performance whilst ensuring base salary levels are not set at artificially low levels. The Company uses remuneration as a significant method of attracting and retaining key employees whose talent can contribute to the Company’s short and long term success.
The remuneration mechanisms employed are well known management and human resources tools that take into account the staff’s skills, experience and performance, whilst supporting at the same time the long-term business objectives.
The Company’s remuneration system takes into account the highly competitive sector in which the Company operates, and the considerable amount of resources the Company invests in each member of the staff.
It is noted that the Company has taken into account its size, internal organisation and the nature, the scope and the complexity of its activities and it does not deem necessary the establishment of a specific remuneration committee. Decisions on these matters are taken on a Board of Directors level while the remuneration policy is periodically reviewed.
The total remuneration of staff currently consists of a fixed component. The remuneration varies for different positions/roles depending on each position’s actual functional requirements, and it is set at levels which reflect the educational level, experience, accountability, and responsibility needed for an employee to perform each position/role. The remuneration is also set in comparison with standard market practices employed by the other market participants/ competitors.
Furthermore there is no variable remuneration component while no remuneration is payable under deferral arrangements (with vested or unvested portions), nor were there any severance payments during the current year.
3.2 Performance Appraisal
The Company implements a performance appraisal method, which is based on a set of Key Performance Indicators, developed for each business unit. The appraisal is being performed as follows:
a. Objectives are set in the beginning of each month, quarter and/or year (each department is being appraised on different periods) defining what the Company functions, departments and individuals are expected to achieve over an upcoming period of time.
b. Performance checks and feedbacks: managers provide support and feedback to the concerned staff during the time periods decided, during the daily activities or during formal or informal performance reviews; the aim is to assist the staff to develop their skills and competencies.
c. Annual performance evaluation: takes place annually, usually at the end of each year.
|Total number of staff|
4.1 The On-going Financial Crisis
The Company’s business primarily involves the offering of investment services relating to non-deliverable foreign exchange, mainly to Retail Clients. Despite the on-going uncertainty over the local economic conditions and the volatility of the financial markets during the period under review, the activity level of the retail foreign exchange market has endured the financial crisis relatively better than most other investment firms involved in other type of investment services and/or financial instruments, and, as such, the Company’s business has not been significantly affected by the on-going financial crisis.
The Company is closely monitoring the effects of the on-going local financial crisis, and it is ready to take the relevant actions when and where necessary.
4.2 Data Retention Policy
The Company pays particular attention to its data retention. To this end, the Company conducts frequent backups (See also Section 1.10 above) with respect to all the Company’s IT systems for all types of data and information and stores these backups at multiple safe remote locations outside the Company’s head offices. All data is stored for at least 5 years.
eToro is all about trading online simply and safe. Learn about eToro's international trading brokers and regulations