The main changes (listed below) involve a ban on all account opening bonus payments to retail traders, and a hard cap on leverage.
The FCA’s moves come just a week after similar measures were introduced by Cyprus financial regulator CySEC. Cyprus is a major center for Retail Forex and Binary Options brokers.
http://www.leaprate.com/wp-content/u...6/10/fcauk.pngContracts for differences, such as spread bets and rolling spot foreign exchange products, are complex financial instruments offered by investment firms, often through online platforms. Following an increase in the number of firms in the CFD market, the FCA has concerns that more retail customers are opening and trading CFD products that they do not adequately understand. The FCA’s analysis of a representative sample of client accounts for CFD firms found that 82% of clients lost money on these products.
The FCA is therefore proposing a package of measures intended to enhance consumer protection by limiting the risks of CFD products and ensuring that customers are better informed. The new measures include:
- Introducing standardised risk warnings and mandatory disclosure of profit-loss ratios on client accounts by all providers to better illustrate the risks and historical performance of products.
- Setting lower leverage limits for inexperienced retail clients who do not have 12 months or more experience of active trading in CFDs, with a maximum of 25:1.
- Capping leverage at a maximum level of 50:1 for all retail clients and introducing lower leverage caps across different assets according to their risks. Some levels of leverage currently offered to retail customers exceed 200:1.
- Preventing providers from using any form of trading or account opening bonuses or benefits to promote CFD products.
The FCA is also setting out its vision on a range of policy measures for binary bets that would complement existing conduct of business rules, once these products are brought into the FCA’s regulatory scope.