Is eToro a Brokerage Firm That We Can Really Rely On?
Probably the most publicized brokerage firm in today’s online trading landscape, eToro is seen by netizens, (trader and average folk alike) as a firm of repute, leading them to think that trading through it might bring profitable endeavours.
With a great deal of reviews affirming sound trading conditions, eToro might be considered as an easy choice for a brokerage. But of course, this is simply a convenient way of looking for a firm that an interested party may want to enlist with. As this is the case, the review team aimed at looking closely at the details of their offers and services so as to render a pointed and informed assessment of the firm’s overall capability.
To serve the cause, the review team had looked into the following facets:
- The regulatory bodies that sanction all of eToro’s trading activities
- The trading instruments that eToro gives its clients access
- The trading accounts made available by the firm
- The trading platforms that are offered for the available accounts
A brokerage firm that services traders through Social Trading and multiple assets, eToro specializes in Copy Trading services.
Since its founding in 2007, eToro had gathered clients across Australia, Cyprus, Israel, the United Kingdom, and the United States. The firm is headquartered in 3 places, namely Limassol, London, and Tel Aviv-Yafo.
eToro’s operations in Europe are sanctioned by the Cyprus Securities & Exchange Commission (CySec). In the United Kingdom, the firm is regulated by the Financial Conduct Authority (FCA). Both these bases of operations follow the stringent provisions of the Markets in Financial Instruments Directives or simply, the MiFID.
eToro, also functioning in Australia, takes cues from the Australian Securities and Investments (ASIC) through its Australian Financial Services License. It is also regulated by the Corporations Act (Commonwealth) so that clients are given access to services provided by eToro Europe.
At the time of writing, the brokerage already gathered millions of clients across 140 countries.
Offers and Services
Accessible Trading Instruments
eToro allows for the trading of 5 asset classifications:
It must be noted that eToro only trades commodities as CFDs. These allow for the selling of short positions with trades being leveraged, and fractional ownership.
When a trader buys a crypto token through eToro, he or she invests on the underlying asset. It is held by eToro for the trader with the trading transaction being unleveraged. It must be noted however that the purchase and sell of underlying assets are in no way regulated, leaving the investor unprotected.
- Foreign Currency Pairs
Like Commodities, eToro only trades Currencies as CFDs. What this means for traders is that they need not buy the underlying asset so that they may be given the ability to trade them. And again, as with Commodities, the selling of short positions are permitted alongside leveraged trades.
Investment of ETFs within eToro means opening a buy, with the position not leveraged. This implies that the trader is investing in the underlying asset. On the other hand, the ETF is held in the trader’s name.
Indices are also traded through eToro as CFDs.
Stocks are bought in eToro through a Buy and in a position that is non-leveraged. The Stock bought is in the trader’s name.
Available Trading Accounts
The trading accounts that eToro offers are not like what its competitors provide. The two accounts are classified as either being a Retail Client Account or Professional Client Account.
The Retail Client Account gives its holders all the firm’s trading instruments and these are allowed to be traded manually or through Copy Trading. Leverage however is restricted. What’s good about the account on the other hand, is that particular protections are provided for through the Investor Compensation Fund. Negative balance protection is also provided by eToro alongside restrictions on margin closeout.
The Professional Client Account was created for those filtered to be truly Professional Clients. The catch here is that the client should waive specific ESMA protections like the Investor Compensation Fund and the assistance offered by the Financial Ombudsman Service.
Professional Accounts holders are entitled to negative balance protection wherein eToro absorbs the client’s loss and effectively reset his or her Equity. In addition, a leverage of up to 1:400 is provided with clients receiving reduction with present margin rates.
Offered Trading Platfroms
eToro offers its own trading platform to its clients. It is a multi-asset platform that allows for access of over 2,000 financial instruments. Access is direct, specifically to stocks and cryptocurencies. The fees are at a low with Copy Trade portfolios automatically available.
Trade with eToro Today!
The features and services outlined in this review are enough to invite interested parties to trade with eToro. The following aspects of the brokerage’s services are deemed sound by the review team:
- The three the financial authorities that are of high-trust that sanctions eToro’s activities
- The expansive trading instruments accessible to eToro’s clients
- The trading accounts that are available in accordance to the type of client the eToro user is
- The proprietary trading platform that eToro provides with a wide range of financial instruments with direct access