Germany’s Federal Financial Supervisory Authority (BaFin) announced it is restricting the marketing, distribution and sale of financial contracts for difference (CFDs). Namely, it forbids the offering of CFDs without negative balance protection to retail clients.
The regulator gives the brokers offering such assets three months from the date of publication of the General Administrative Act to adjust their business models, i.e. until August 10, 2017.
This happens after in December BaFin announced its plans to limit the distribution and restricts the marketing, distribution and sale of financial contracts for difference (CFDs) to retail clients. Then, as well as now, BaFin expressed its concern with unforseeable risk of loss for the retail traders – not limited to the client’s margin payment, but to all his/her assets.
“For consumer protection reasons, we cannot accept that. The restriction of CFD trading is therefore a necessary step to protect retail investors”, said BaFin Executive Director Elisabeth Roegele. “By restricting trading in CFDs we are making use for the first time of the product intervention option”, she added.
It is worth noting, that BaFin’s initial plans included banning the offering of CFDs with margin altogether, but has obviously changed its mind.
Either way, the German regulator becomes the latest addition to the list of European financial markets and services watchdogs who take measures to better protect retail clients from excessive loss from forex, CFD and binary options trading. The Cyprus Securities Exchange Commission (CySEC) and UK’s Financial Conduct Authority (FCA) set an initial leverage cap of 1:50 and banned bonuses. France’s AMF prohibited the advertising of forex, CFD and binary options products, while the Netherlands intends to do so. Meanwhile, Belgium has prohibited the distribution of forex, CFD and binary options in the country altogether.