# Client Categorization Policy Trek Labs Europe Ltd. dba Backpack EU ## 1. Introduction Backpack EU is a brand name owned and operated by Trek Labs Europe Ltd (formerly FTX EU and FTX EU Ltd, respectively) (hereinafter referred to as the “Company,” “Backpack EU,” “us,” or “we”), a company incorporated in Cyprus with registration number HE 335683 and authorised by the Cyprus Securities and Exchange Commission (“CySEC”) under license no. 273/15, with registered address at Aiolou & Panagioti Diomidous 9, Katholiki, 3020 Limassol, Cyprus. Following the implementation of the Markets in Financial Instruments Directive 2014/65/EU **(MiFID II**) and in accordance to the provisions of the Investment Services and Activities and Regulated Markets Law of 2017 (Law 87 (I)/2017) (hereinafter called the “**Law**”), the Company is required to categorise its Clients into one of the following three categories, each with different levels of protection and rights: (a) **Retail**, (b) **Professional** or (c) **Eligible Counterparty**, depending on the information provided by each Client during the account opening process. ## 2. General Principles The Company, prior to engaging in business relationship with its potential clients, it shall inform clients about their categorisation, their rights to request a different categorisation and about any limitations to the level of client protection that such change of categorisation would entail. It should be noted that each category entails a different level of client protection - maximum degree of protection is given to **Retail Clients** while minimum protection is given to **Eligible Counterparties**. It is stated that the Company has the right to review the current Policy and if changes need to be made herein, the Company shall accordingly change the categorisation of a Client if this is deemed necessary subject to applicable Regulations. ## 3. Categorisation Criteria The categorisation criteria set by the Law (as amended from time to time) are the following: ### 3.1 Retail Clients ‘**Retail Client**’ is a client who is not a Professional Client or an Eligible Counterparty. ### 3.2 Professional Clients ‘**Professional Client**’ is a client who possesses the experience, knowledge and expertise to make his own investment decisions and properly assess the risks that he incurs. Certain categories of clients are considered to be Professional Clients on the basis of the provisions of MiFID II and the Law. These are also referred to as “per se” professional clients. Other clients may be treated as Professional Clients on request provided that the relevant criteria and procedures provided in MiFID II and the Law are satisfied. Those are referred to as “Elective” professional clients. #### A. Categories of clients who are considered to be professionals - Per se Professional Clients The following should all be regarded as professionals in all investment services and activities and financial instruments for the purposes of MiFID II and the Law: a) Entities which are required to be authorised or regulated to operate in the financial markets. The list below should be understood as including all authorised entities carrying out the characteristic activities of the entities mentioned: entities authorised by a Member State under a Directive, entities authorised or regulated by a Member State without reference to a Directive and entities authorised or regulated by a non-Member State: * Credit institutions. * Investment firms. * Other authorised or regulated financial institutions. * Insurance companies. * Collective investment schemes and management companies of such schemes. * Pension funds and management companies of such funds. * Commodity and commodity derivatives dealers. * Local enterprises. * Other institutional investors. b) Large undertakings meeting two of the following size requirements on a company basis: * balance sheet total of minimum EUR 20,000,000; * net turnover of at least EUR 40,000,000; * own funds of at least EUR 2,000,000. c) National and regional governments, public bodies that manage public debt, Central Banks, international and supranational institutions such as the World Bank, the International Monetary Fund (IMF), the European Central Bank (ECB), the European Investment Bank (EIB) and other similar international organisations. d) Other institutional investors whose main activity is to invest in financial instruments, including entities dedicated to the securitisation of assets or other financing transactions. The entities mentioned above are considered to be professionals. However, they are allowed to request non-professional treatment and we may agree to provide a higher level of protection. Where a Client is an undertaking referred to above, the Company must inform the Client, prior to any provision of services that, on the basis of the information available to us, the Client is deemed to be a Professional Client, and will be treated as such unless the Company and the Client agree otherwise. The Company must inform the Client that he may request a variation of the terms of the agreement in order to secure a higher degree of protection. It is the responsibility of the Client, considered to be a Professional Client, to ask for a higher level of protection when it deems it is unable to properly assess or manage the risk involved. This higher level of protection will be provided when a Client who is considered to be a Professional Client, enters into a written agreement with us to the effect that it shall not be treated as a Professional Client for the purposes of the applicable conduct of business regime. Such agreement will specify whether this applies to one or more particular services or transactions, or to one or more types of products or transactions. ### 3.3 Eligible Counterparties ‘**Eligible Counterparty’** is any of the following entities to which a credit institution or an investment firm provides the services of reception and transmission of orders on behalf of clients and/or execution of such orders and/or dealing on own account: a) Cyprus Investment Firms and remaining investment firms; b) credit institutions; c) insurance undertakings; d) UCITS and their management companies; e) pension funds and their management companies; f) other financial institutions authorised by a Member State or regulated under the laws of Cyprus or under the European Union law; g) national governments and their corresponding offices including public bodies that deal with public debt at national level, central banks and supranational organisations. ## 4. Request for Different Categorisation The following requests may be submitted to the Company: * Retail Clients can request to be categorized and treated as Professional Clients in which case they will be afforded a lower level of protection. * Professional Clients can request to be categorized and treated as Retail Clients in which case they will be afforded a higher level of protection. * Eligible Counterparties can request to be categorized and treated as either Retail or Professional Clients in which case they will be afforded a higher level of protection. It is noted that the Company will assess specified quantitative and qualitative criteria in accordance with the provisions of the Law and the change of categorization will depend on its absolute discretion. In this respect, the Company reserves the right to decline any of the above requests for different categorisation. ## 5. Procedure for Change of Categorisation ### 5.1 Retail Clients who may be treated as professional clients on request (i.e. Elective Professional Clients) Clients who may be classified as Professional Clients upon request (“Elective Professional Clients”) are those other than the categories referred to in paragraph 3.2.1 above, including public sector bodies, local public authorities, municipalities, and private individual investors. Such Clients may be permitted to waive certain protections afforded under the conduct of business rules. The Company may classify any such Client as a Professional Client upon receipt of a relevant request, in which case the procedure set out below shall be followed. The Company may classify such Clients as Professional Clients upon receipt of a relevant request, in which case the procedure outlined below will be followed. However, these Clients will not be presumed to have the same level of market knowledge and experience as Per Se Professional Clients. Any waiver of the protections afforded under the standard conduct of business regime will only be valid where the Company, following an appropriate assessment of the Client’s expertise, experience, and knowledge, reasonably determines—taking into account the nature of the proposed transactions or services—that the Client is capable of making informed investment decisions and understanding the associated risks. Clients who have been initially classified by the Company as Retail Clients are allowed to request to be treated as Professional Clients, if an adequate assessment of the expertise, experience and knowledge of the client undertaken by the Company gives reasonable assurance, in light of the nature of the transactions or services envisaged, that the client is capable of making investing decisions and understanding the risks involved. An example of the assessment of expertise and knowledge with regards to entities licensed under directives in the financial field could be the fitness test applied to the managers and directors of such entities. In the case of small entities, the person subject to that assessment shall be the person authorised to carry out transactions on behalf of the entity. In the course of that assessment, as a minimum, two of the following criteria shall be satisfied: * The client has carried out transactions, in significant size, at an average frequency of 10 per quarter over the previous four quarters. * The size of the client’s financial instrument portfolio exceeds EUR 500.000. * The client works or has worked in the financial sector for at least one year in a professional position, which requires knowledge of the transactions or services envisaged. Those clients may waive the benefit of the detailed rules of business conduct only where the following procedure is followed: * they must state in writing to the Company that they wish to be treated as a professional client, either generally or in respect of a particular investment service or transaction, or type of transaction or product; * the Company must give them a clear written warning of the protections and investor compensation rights they may lose; * they must state in writing, in a separate document from the contract, that they are aware of the consequences of losing such protections. Before deciding to accept any request for waiver, the Company must take all reasonable steps to ensure that the client requesting to be treated as a professional client meets the relevant requirements stated above. The Company shall notify in writing all Clients who request a change in their categorisation, in accordance with the above, as to whether such request has been approved or rejected. The Company reserves the right to reject any such request where it determines that the Client does not meet the criteria for the requested client classification. Professional clients are responsible for keeping the Company informed about any change, which could affect their current categorisation. Should the Company become aware however that the client no longer fulfils the initial conditions, which made him/her eligible for a professional treatment, the Company shall take appropriate action. Where the appropriate action involves re-categorising that client as a Retail Client, the Company shall notify that client of its new categorization. ### 5.2 Professional Clients who may be treated as Retail Client on request A Professional Client is allowed to request non-professional treatment and the Company may agree to provide a higher level of protection. In this respect, the Company notifies its clients, prior to the provision of services, in a written form, of their option to be classified as retail clients and secure a higher degree of protection. The Company proceeds in this action, in order to offer a uniform level of protection to all of its clients. The higher level of protection will be provided by the Company when the client enters into a written agreement with the Company, to the effect that it shall not be treated as a professional. Such agreement shall specify whether this applies to one or more particular services or transactions or to one or more types of product or transaction. It is the responsibility of the client who is classified as a professional client to ask for a higher level of protection when he is not in a position to properly assess and manage the risks involved in the transactions. It should be pointed out to all the clients that Professional Clients are not covered by the Investor Compensation Fund for clients of investment firms. The Company shall be entitled to assume that a Professional Client has the necessary experience and knowledge in order to understand the risks involved in relation to those particular investment services or transactions, or types of transactions or product, for which the client is classified as a Professional Client and also that the client is able financially to bear any related investment risks. The Company is not required to prioritize the overall costs of a transaction as being the most important factor, when providing Professional Clients with best execution. ### 5.3 Eligible Counterparties who may be treated as Retail or Professional Clients on request An Eligible Counterparty is allowed to request, either on a general form or on a trade-by-trade basis, treatment as client whose business with the Company is subject to Sections 25, 26, 28 and 29 of the Law 87(I)/2017 and the Company may agree to provide a higher level of protection. In this respect, the Company notifies its clients, prior to the provision of services, in a written form, of their option to request such treatment. The relevant request to the Company must be made in writing and shall indicate whether the treatment as retail client or professional client refers to one or more investment services or transactions, or one or more types of transaction or product. Where an Eligible Counterparty requests treatment as a client whose business with an investment firm is subject to Sections 25, 26, 28 and 29 of the Law 87(I)/2017, but does not expressly request treatment as a Retail Client, the Company shall treat that Eligible Counterparty as a Professional Client. Where the Eligible Counterparty expressly requests treatment as a Retail Client, the higher level of protection will be provided by the Company when the client enters into a written agreement with the Company, to the effect that it shall not be treated as a Professional. Such agreement shall specify whether this applies to one or more particular services or transactions or to one or more types of product or transaction. It is the responsibility of the client to ask for a higher level of protection when it deems unable to properly assess or manage the risks involved. ## 6. Protection Rights for Retail Clients ### 6.1 Protections waived by Professional Clients: When a client is categorised as a Professional Client, they waive certain protections that are otherwise afforded to Retail Clients under applicable law. The waived rights include, but are not limited to, the following: a) The Company may communicate with Professional Clients in a way that differs in simplicity and frequency from its communications with Retail Clients. Although the Company will ensure that all communications and information provided to Clients are fair, clear, and not misleading, it is not required to comply with the rules governing the content and restrictions of such communications. In particular, the Company must provide Retail Clients with additional information regarding transactions in complex financial instruments, including detailed risk warnings and notices, whereas this requirement does not apply to Professional Clients. b) The information the Company provides about itself, its services, products, and remuneration differs between Retail Clients and Professional Clients. Specifically: * Although the Company is required to provide such information to all Clients, the level of detail, format, and timing may be less extensive for non-Retail Clients; * Certain restrictions on staff remuneration that may apply when servicing Retail Clients may not apply to staff dealing with Professional Clients; and * Information regarding the costs and charges of the Company’s services and products may be less comprehensive for Professional Clients compared with Retail Clients. c) When providing Professional Clients with best execution, the Company is not required to treat the overall consideration—i.e., the price and costs of the transaction—as the primary factor in achieving best execution. While price remains an important consideration, the relative importance of other factors, such as speed, costs, and fees, may vary. Unless the Professional Client provides the Company with specific instructions, we will deliver best execution in accordance with the Law, regardless of your client classification. For details on how we seek to achieve best execution, please refer to our [Order Execution Policy](https://eu.support.backpack.exchange/legal-documentation/order-execution-policy#id-3.4.1-nature-of-the-order). d) When executing orders on behalf of Retail Clients, the Company is obliged to inform them of any material difficulties encountered in carrying out those orders. This requirement may not apply to Professional Clients. e) The Company is required to assess the appropriateness of its products when dealing with Retail Clients. For Professional Clients, however, the Company may generally assume that they possess the necessary knowledge, experience, and expertise to understand the risks associated with the products and services for which they are classified as Professional Clients. Notwithstanding this, Elective Professional Clients cannot be assumed to have the same level of knowledge, experience, and expertise as Per Se Professional Clients. f) Regarding the Company’s reporting obligations to Clients, the timeframe for confirming that an order has been executed is more stringent for Retail Clients than for Professional Clients. g) Retail Clients of the Company are covered by the [Investor Compensation Fund](https://eu.support.backpack.exchange/legal-documentation/investor-compensation-fund-notice) (“ICF”), which aims to protect the claims of eligible clients of regulated Cyprus Investment Firms (“CIFs”) that are members of the Fund, up to the amount specified by the relevant Law, in the event that a CIF is unable to meet its financial obligations. Professional Clients, however, are not eligible for compensation under the ICF. h) Professional Clients may forfeit their right to refer complaints to either CySEC or the Financial Ombudsman. Certain Professional Clients and Eligible Counterparties—such as large institutions and firms regulated by CySEC—will not be considered eligible complainants for referral to the Financial Ombudsman. i) The Company has a greater duty of care and liability toward Retail Clients than toward Professional Clients. j) The requirements under the applicable Client Money rules are more prescriptive and provide greater protection for Retail Clients than for Professional Clients. Nevertheless, we will treat all Client funds in accordance with these rules, regardless of client classification, unless otherwise agreed in writing. ### 6.2 1.1 Protections waived by Eligible Counterparties: When the Company classifies a Client as an Eligible Counterparty, the Client will receive a lower level of protection under the Law than they would as a Professional Client. In particular, and in addition to the points outlined above: a) The Company is not obligated to provide Eligible Counterparties with best execution when executing their orders. b) The Company is not required to provide Eligible Counterparties with information about the Company, its services, or the remuneration arrangements in place. c) The Company is not required to assess the suitability of any product or service for Eligible Counterparties and may assume that they have the expertise to select the most appropriate product or service, as well as the financial capacity to bear the associated risks in line with their investment objectives. d) The Company is not required to disclose to Eligible Counterparties any details regarding fees or commissions it pays or receives. e) The Company is not required to provide risk disclosures to Eligible Counterparties for the products or services they choose. f) The Company is not required to provide reports to Eligible Counterparties regarding the execution of their orders. g) Any claims of Eligible Counterparties are not covered by the Investor Compensation Fund. ## 7. Record – Keeping The Company must keep records of each notice provided and each agreement entered into in accordance with the present Policy. The Company shall keep records in relation to each client in relation to (a) the categorization established for the client, including sufficient information to support that categorization; (b) evidence of despatch to the client of any notice required under this Policy and a copy of the actual notice provided; and (c) a copy of any agreement entered into with the client under this Policy. *** **Risk warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all of your capital. Please consider our** [**Risk Disclosure**](https://eu.support.backpack.exchange/legal-documentation/broken-reference)**.** **Legal**: This website is operated by Trek Labs Europe Ltd (formerly FTX EU Ltd), registration number HE335683, with registered address at Aiolou & Panagioti Diomidous 9, Katholiki, 3020 Limassol, Cyprus. Trek Labs Europe Ltd (formerly FTX EU Ltd) is authorized and regulated by the Cyprus Securities and Exchange Commission (CySEC) under license number 273/15. The company operates through [https://eu.backpack.exchange](https://eu.backpack.exchange/) (formerly and [https://ftxeurope.eu](https://ftxeurope.eu/)) and uses the trade name Backpack EU (formerly FTX EU).