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FCA imposes bonus ban and leverage cap for CFDs

  • #61
  • Dec 7, 2016 7:06am Dec 7, 2016 7:06am
Quoting yesyoucan
{quote} Huge leverage isn't good but 1:10 or 1:50 are not fare too. We trade forex because of leverage advantage and there is no justification to dump huge amount in broker's account. I don't think leverage can protect anyone from losing in forex, high leverage is faster loss and low leverage is slower loss if anyone has lack of trading skills. {quote} Fx has very low volatility?!!! Never knew that. Thanks for this info.
Yes It is
1% per day is very a lot ?! lol
1% * 50(leverage = 50 ! ...this is absolutely shit! ... who made a trade 100% deposit , margin 100% or near it ? some noise can margin call it.
  • #62
  • Dec 7, 2016 8:51am Dec 7, 2016 8:51am
Quoting javad.111
{quote} Yes It is 1% per day is very a lot ?! lol 1% * 50(leverage = 50 ! ...this is absolutely shit! ... who made a trade 100% deposit , margin 100% or near it ? some noise can margin call it.

Some noise hahahaha, noise that takes 24h? What about people that don't flip a coin to enter market? If somebody uses 6-10 pip stop loss, he/she needs big leverage to earn good money if he/she doesn't want to deposit whole investing capital at broker's account. Many people prefer to keep most of investing capital at bank's account rather than at broker's account.
  • #63
  • Dec 8, 2016 8:30am Dec 8, 2016 8:30am
next ....

08.12.2016 - Topic Consumer protection BaFin plans to limit CFD trading


https://www.bafin.de/SharedDocs/Vero...fg_cfd_en.html
  • #64
  • Edited 9:18am Dec 8, 2016 8:55am | Edited 9:18am
Quoting so_what
next .... 08.12.2016 - Topic Consumer protection BaFin plans to limit CFD trading https://www.bafin.de/SharedDocs/Vero...fg_cfd_en.html
The question is, does this only affect german institutions to distribute these products, or does it prohibit german traders to use these products whereever in the world..

PS: after intensively reading the whole document, I found the critical point: only CFDs including a call for additional cover are going to be prohibited! In case the broker takes the risk and discloses this potential call nothing would change.
  • #65
  • Dec 8, 2016 9:12am Dec 8, 2016 9:12am
Quoting PoundTrader
Is this all overreaction and overkill?
If the maximum allowed leverage is 1:50, then I believe yes.

I see people saying this is good because of the newbies and all that would protect them. I disagree.


First, if the newbie was acting responsibly he/she would be aware of all the risks when opening a real account.

It would be an irresponsibility if a newbie does not try a demo account first and actually understand all the risks involved and the knowledge of the markets and forex brokers before opening a real account and start trading in the dark.


I believe a low leverage, like 1:50, interests only those who have a big sum of capital available.

With higher leverage, the small capital people will have more possibilities to earn a decent amount while being able to survive larger drawdowns.
  • #66
  • Dec 8, 2016 9:21am Dec 8, 2016 9:21am
The most important parts from the new German regulation:

3.2.1.
Effects of the restriction on retail investors

The effects of the restriction on retail investors are proportionate.
The restriction pertains to the marketing, distribution and sale of CFDs
to retail investors where the CFDs establish an obligation on the part of
the retail investor to make additional payments. CFDs without an additional
payments obligation, on the other hand, may continue to be marketed,
distributed and sold to retail investors. Access to CFDs for retail
clients within the meaning of section 31a (3) of the WpHG is therefore
not blocked completely.
The interest of retail investors in using CFDs with an additional payments
obligation comes behind the public interest in limiting the risks
associated with this particular financial instrument......................................

Furthermore, it must be considered that retail investors are not completely
barred from trading in CFDs with an additional payments obligation.
If they gain the trading experience referred to in section 31 (7) of
the WpHG or if they have the requisite professional experience within
the meaning of section 31a (7) sentence 3 no. 3 of the WpHG, they
can,
pursuant to section 31a (7) sentence 1 of the WpHG, request to be categorized as a professional
client and, following the granting of this status,
receive access to unlimited CFDs, provided they have cash deposits and
financial instruments worth in excess of EUR 500,000. This is appropriate,
since it can be assumed that such an
investor, based on their experience, knowledge and expertise, is able to adequately
assess the incalculable risks that are attached to a CFD and bear the
associated financial risks.
  • #67
  • Dec 8, 2016 9:41am Dec 8, 2016 9:41am
Quoting alphaomega
request to be categorized as a professional client and, following the granting of this status, receive access to unlimited CFDs, provided they have cash deposits and financial instruments worth in excess of EUR 500,000.
Seems a real broker/CFD killer to me as many who have E500k won't want to deposit all of it with a broker when they probably offer E100k protection.

Remember President Regan's famous quote "what are the ten scariest words in the English language?"

Hello, I'm from the Government and I'm here to help.
Road To Wisdom? To err and err and err again, but less and less and less...
  • #68
  • Dec 8, 2016 9:45am Dec 8, 2016 9:45am
Once again, as long as the broker takes the risk and compensates any loss exceeding the deposit nothing is going to change. From that view it might even be a "positive" aspect for retail traders.
  • #69
  • Dec 8, 2016 9:50am Dec 8, 2016 9:50am
Quoting Calculus
{quote} Seems a real broker/CFD killer to me as many who have E500k won't want to deposit all of it with a broker when they probably offer E100k protection. Remember President Regan's famous quote "what are the ten scariest words in the English language?" Hello, I'm from the Government and I'm here to help.
The conclusions based on the intentions of the regulators:

The retail traders are just dumb consumers who need to be protected from themselves. (by restricting the access to the market and some financial instruments)

However if you are rich and have piles of free cash, the restrictions do not apply! You just have to ask to be categorized as "professional client" and then you can do what ever you want. No restrictions......

In short if you are poor - you're screwed anyway.

The regulators assume that the rich = professionals.
Like somehow having 500K in the bank will prevent the losses.....
So according to the regulator if you have millions you are safe... and the market risks do not affect you.
What a nonsense......
  • #70
  • Dec 8, 2016 9:54am Dec 8, 2016 9:54am
My hope in this current climate of regulations review, this two piece of regulation is imposed on the broker that -

1. the trader shall not lose more than the amount in their account, and

2. the broker will not take a counterparty position to the traders trades.

The best Christmas gift. Halelujah !
  • #71
  • Dec 8, 2016 11:18am Dec 8, 2016 11:18am
Quoting skyway
My hope in this current climate of regulations review, this two piece of regulation is imposed on the broker that - 1. the trader shall not lose more than the amount in their account, and 2. the broker will not take a counterparty position to the traders trades. The best Christmas gift. Halelujah !
It's impossible, it can be done only when you trade at scam market maker broker that earns when you lose. When you trade with leverage you should be ready to lose for example 200 times more than your deposit as it was possible when SNB removed 1.20 level on eurchf and you had 1:500 leveraged position
  • #72
  • Dec 8, 2016 11:24am Dec 8, 2016 11:24am
Quoting so_what
next .... 08.12.2016 - Topic Consumer protection BaFin plans to limit CFD trading https://www.bafin.de/SharedDocs/Vero...fg_cfd_en.html
Most of the time can see some kind of light in the tunnel where these type of announcements are concerned but this one looks pretty grim. In some respects I can understand the argument especially from the perspective of the person hit by a EURO 280,000 debt trading off of a EURO 2,800 account when the SNB did their decoupling trick. But to slay the entire leveraged market and only make CFD trading available to those with half-a-million-Euro? Wow.
  • #73
  • Dec 8, 2016 11:46am Dec 8, 2016 11:46am
Quoting simond2002
{quote}But to slay the entire leveraged market and only make CFD trading available to those with half-a-million-Euro? Wow.
They didn't do that. Some brokers "forgave" their clients their SNB debt. Other brokers already actively advertise that you can't lose more than you had invested and from a retail perspective that makes some sense because as I stated earlier many retail clients do not understand the concept of leverage and margin. If enough retail brokers will be forced into a "you can't lose more than you deposited" there will be a market to solve that debt problem using insurance companies. It might drive up retail trading costs a bit and these insurers will probably create stringent rules for reduced leverage on weekends or on some upcoming very important events like elections - the latter isn't even new, many brokers already do that.
  • #74
  • Dec 8, 2016 11:52am Dec 8, 2016 11:52am
Quoting JensG
{quote} They didn't do that. Some brokers "forgave" their clients their SNB debt. Other brokers already actively advertise that you can't lose more than you had invested and from a retail perspective that makes some sense because as I stated earlier many retail clients do not understand the concept of leverage and margin. If enough retail brokers will be forced into a "you can't lose more than you deposited" there will be a market to solve that debt problem using insurance companies. It might drive up retail trading costs a bit and these insurers...
If that is the case, then yes it can be light in the tunnel. Before posting I searched the document for a clause relating to reducing leverage (for example the 1:50 which seems popular among these regulators) but couldn't find one. Did you see it in there?
  • #75
  • Dec 8, 2016 12:39pm Dec 8, 2016 12:39pm
Quoting simond2002
{quote} If that is the case, then yes it can be light in the tunnel. Before posting I searched the document for a clause relating to reducing leverage (for example the 1:50 which seems popular among these regulators) but couldn't find one. Did you see it in there?
They didn't mention leverage so I assume they'll abolish leverage by enforcing 1:1. Na, just kidding you. That wouldn't make much sense - the problem (for them) is that/when people lose more than they had invested so that problem is basically "solved".

I do not always, well actually rarely, agree with the regulators about their proposals but I do agree that there is something very wrong in the retail market.

BTW: from a brokers point of view it's absolutely ridiculous to try to get a 5 or 6 figure sum back from a retail customer (in most cases at least) so I'm not entirely sure that these changes will have ANY effect on the broker.
  • #76
  • Dec 8, 2016 3:39pm Dec 8, 2016 3:39pm
Quoting BlueKnight
{quote} If the maximum allowed leverage is 1:50, then I believe yes. I see people saying this is good because of the newbies and all that would protect them. I disagree. First, if the newbie was acting responsibly he/she would be aware of all the risks when opening a real account. It would be an irresponsibility if a newbie does not try a demo account first and actually understand all the risks involved and the knowledge of the markets and forex brokers before opening a real account and start trading in the dark. I believe a low leverage, like 1:50,...
True
  • #77
  • Dec 8, 2016 3:40pm Dec 8, 2016 3:40pm
Quoting Calculus
{quote} Seems a real broker/CFD killer to me as many who have E500k won't want to deposit all of it with a broker when they probably offer E100k protection. Remember President Regan's famous quote "what are the ten scariest words in the English language?" Hello, I'm from the Government and I'm here to help.
LMAO
  • #78
  • Dec 10, 2016 3:46pm Dec 10, 2016 3:46pm
Some of you guys made some valid points..... the others who talk about ASIC need to do some proper research.

ASIC and FCA are like best friends. & ASIC already had the idea to cut leverage many years ago, FCA approved and started analysing statistics since 2009.

I see it both ways, on the one hand it is good, but on the other.... gamblers will still lose their money.
  • #79
  • Dec 12, 2016 5:35am Dec 12, 2016 5:35am
The German regulator BaFin is also considering tightening regulation on CFD trading. They intend to limit the marketing, distribution of and trading in financial contracts for difference (CFDs) as a measure to protect retail investors. Contracts with an additional payments obligation, such as margin, will soon not be available to retail clients.
BaFin published a draft General Administrative Act concerning the issue. Once the rules are approved, they will come into effect within three months of that date.
“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”, said BaFin head Elisabeth Roegele.
  • #80
  • Dec 12, 2016 1:38pm Dec 12, 2016 1:38pm
Cutting leverage reduces the possibilities for scalpers as already mentioned above.

I demo traded for years and played with micro accounts. If you lose money and your system isn't going to plan, go back to demo trading. It amazes me; these stories of people losing $10k $20K etc...

The only thing I'm worried about is: will spreads and commissions increase in the long run? how will less retail participants affect the cost of trading?

I have often wondered how long will these low spreads last? and will they get any smaller? if so how would brokers make a profit when you have scalpers killing it now as it is ?

So inevitably in this matrix system we live in we can't have too many winners, so the barriers to entry will have to increase, higher trading cost or higher deposit or regulation such as an FCA license to trade FX. This proposal will go through eventually if not this time as proposed by the FCA CFD, Spot, Spread betting etc for FX , cost of trading cannot get any lower, the "good ole' days" are on its' way out. Scalpers probably got another 4 yrs maybe...EURUSD spreads back to 2.2 pips like in 2006.
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