Protection against negative balance required in Germany
The financial supervisory authority gives three months to the CFD brokers to add a protection against negative balance
The financial regulator, German BaFin has published an announcement which provides more details on its position towards the trading of forex and CFDS. The regulator focuses on brokers who do not provide protection against the negative balance and that expose their customers to unlimited losses.
BaFin emphasises that it intervenes on the market in order to safeguard the interests of retail customers. An administrative law general has been published, it shall specify the reason for the decision.
The executive director of the regulatory authority, Elisabeth Roegele, said : “by limiting the trading of CFDS, we use for the first time an intervention option on the product”.
The crisis of the SNB continues to persevere in the industry
The regulator underlined its concerns about the increased risk to customers due to the probability of ending up with a negative balance important because of the high degree of leverage used by retail customers. During the crisis induced by the swiss national bank on the Forex, a number of traders have had to pay to the brokers of the amounts that have exceeded the value of their assets.
“For reasons of consumer protection, we can’t accept this. The restriction of the trading of CFD is therefore a necessary step to protect the retail investors,” says Roegele.
The guard dog German limit the marketing, distribution and sales for the Forex brokers that do not comply with the protection against the negative balance. The BaFfin was given 3 months for companies to comply with the requirements in order to be able to continue to operate in the country.
At the conclusion of his announcement, the regulator explains that some Forex brokers already offer protection against the negative balance. The announcement of the regulator German now puts an end to the question, which gives brokers time to implement the necessary changes prior to the month of August.
