FCA Plans to Ban Crypto Derivatives, ETNs

The United Kingdom’s financial watchdog on Wednesday announced its intentions to ban the sale of crypto-based derivatives and Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term-traded notes (ETNs) to retail customers.

Per the Financial Conduct Authority (FCA), these investment instruments are “ill-suited” for retail investors who cannot access the value and risks associated with them.

The FCA’s plan for this not an abrupt one as the agency is considering to ban retail sales of derivatives since last year. Finance Magnates also reported that the watchdog agency created a task force with staffs from the Treasury and the Bank of England to access the crypto-asset investment instruments.

Not suitable for unskilled investors

The agency pointed out the shortcomings of digital assets, mentioning that they have no reliable basis for valuation and are susceptible to market abuse and crime in the secondary markets. The Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term of the crypto market also restricts the ability of retail investors to understand the investment patterns.

“These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products,” FCA stated.

It is estimating that banning these investment products will benefit retail customers by keeping them from loosing anywhere between £75 million ($94 million) to £234.3 million ($294.5 million) a year.

Though the decision to ban derivative products, including CFDs, options, and futures along with ETNs is not confirmed, the agency is consulting to put a ban on “the sale, marketing and distribution” of these products to all retail consumers.

“As with our work on the wider CFD and binary options markets, we will act when we see poor products being sold to retail consumers. These are complex contracts built on top of complex assets,” Christopher Woolard, executive director of strategy & competition at the FCA, said.

Meanwhile, the FCA granted a license to crypto hedge fund Prime Factor Capital, making it the first such firm to receive the approval.