Negative balance protection aims at protecting retail clients in exceptional circumstances where there is a price change in the underlying that is sufficiently large and sudden to prevent the broker from closing out the position as required by the margin stop-out protection, such that the client has a negative account value. In other words, large market events can cause gapping, preventing the automatic margin stop-out protection from being effective.
The purpose of negative balance protection is to ensure that an investor's maximum losses at Amenda, including all related costs, are limited to the amount of total funds across the investor's trading account. This should include any funds yet to be paid into that account due to net profits from the closure of open positions associated with that account. An investor should not incur any additional liability connected with his/her trading. All ESMA-regulated brokers of leveraged products are required to provide negative balance protection to retail investors on a per-account basis. Please note, however, that negative balance protection is not available to professional investors.

How It Works

Let's say you are a retail client with EUR 10,000 deposited in your trading account. Amenda's stop-out level for retail clients is 50%. This means, your position should be closed out automatically once your equity reaches EUR 5,000. As the market approaches the stop-out level, it undergoes immense volatility, creating gaps in the prices and a lack of liquidity to fill orders. While your automatic stop-out is triggered, you find your balance below zero by the time it is executed. In such an event, you qualify for negative balance protection, and your negative balance is offset to zero, leaving you with no liability beyond the amount you deposited.