bafin
bafin

Financial regulator of Germany – BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) has decided to limit CFDs ads in the country, following the UK Financial Conduct Authority, which had introduced measures to protect retail market in the UK.

BaFin wants to reduce the marketing, or any distribution and sale of financial contracts for difference (CFDs). Moreover, it is also monitoring the negative balance risks and is therefore requiring that no CFDs with an additional payments obligation can be offered to retail clients. Thus the regulating authority shows that it cares about the protection of investors in Germany.

The Chief Executive Director of BaFin, Elisabeth Roegele told medias:
”In the case of CFDs with an additional payments obligation, the risk of loss for the investor is incalculable. For consumer protection reasons, we cannot accept that.”

In a statement of the IG Group, there is stated that the intended measure issued by BaFin can only be undertaken if the client is not at risk of losing more than the value of their account.

“IG will carefully consider the full implications of the BaFin announcement and will be seeking to meet with BaFin before responding to the consultation, in accordance with the timeline provided of 20 January 2017,” the statement reads.

According to the regulator, the risks from negative balance can not be reduced by the use of stop losses and/or a margin call that is issued by the brokers. Force closing an investor’s position can result in substantial losses as we have seen in the cases of the SNB and the GBP flash crash recently. The issues arising from execution at the next available price, which can be substantially different from the intended stop loss order’s value is greatly increasing the risks for traders, the official statement by the German regulator reads.

Financial contracts for difference – CFDs, are used by investors to speculate on the performance of underlying instruments such as indices, shares, commodities, currency pairs or interest rates.

Compared to a direct investment, the capital invested is small. Positive and negative price changes are mirrored by the CFD.

The regulator has published the planned General Administrative Act on its website and is welcoming comments from brokers and traders alike. The can be submitted writing until the 20th of January 2017.

For any questions or recommendations, feel free to write us on hello@goforex.eu

For an questions regarding brokers, FX market, marketing visit checkusmedia.com or write one info@checkus.sk