The FCA considers banning binary options and restricting CFD trading permanently

Broker Discussion
1

The UK Financial Conduct Authority (FCA) has proposed permanent ban on binary options, as well as permanent restriction on the sale, marketing and distribution of contracts for difference (CFDs) and similar products to retail investors.

In fact, the FCA is suggesting to make the measures introduced by the European Securities and Markets Authority (ESMA) permanent in the UK. More specifically, the FCA is proposing that forex brokers must apply the following measures regarding the Contracts-for-Difference (CFDs) sold to retail clients:

-leverage limitation of 1:2 to 1:30 by collecting minimum margin as a percentage of the overall exposure that the CFD provides;
-closing out a customer’s position when their funds fall to 50% of the margin needed to maintain their open positions on their CFD account;
-providing negative balance protection;
-stop offering monetary and non-monetary inducements to encourage trading, such as bonuses;
-provide a standardized risk warning, which requires firms to tell potential customers the percentage of their retail client accounts that make losses.

1 Like
2

Hmmm interesting proposition. It absolutely copies the ESMA rules we already have:

  • 1:30 leverage
  • 50 % stop out
  • we already have negative balance protection
  • we all know that bonuses are a scam
  • most brokerws already have a system for categorizing their clients in terms of risk ration and knowledge base
    So I’m not sure what is the goal of this proposition as EU clients are already under the ESMA rules and UK is still part of the EU. Maybe FCA is considering Brexit…
3

I welcome this. The more cleaned up this industry can become the better. Right now many brokers websites can be hard to distinguish from your average casino website, and that should tell you something…

As someone coming from the stock and equities world was shocked when I first discovered FX, the amount of shady brokers in this industry is through the roof.

4

I agree about the shady brokers. They are so many of them, and a lot of newbie traders don’t know how to distinguish them from the proper brokers, and then they become victims of scams.

1 Like
5

The German regulator BaFIN is also planning to to apply permanently ESMA’s CFD trading restrictions on a national level. The decision is intended as a protective measure for retail investors which will take effect in 2019.

1 Like