CMC Markets, IG Group, Plus500 Endorse BaFin’s New Protection Requirements

CMC Markets Plc, a provider of retail foreign exchange (FX) and contracts-for-differences (CFDs) services, has endorsed the recent stance taken by German regulator BaFin, which recently asserted a stronger stance for Negative Balance Negative Balance In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader place In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader place Read this Term protections, intervening on behalf of retail clients.

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Earlier this week, BaFin issued an announcement that introduced more specifics about its retail Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term and CFDs trading stance. The watchdog focused specifically on brokers that are not providing clients with negative balance protection, thereby exposing clients to unlimited losses.

Despite the stern warning, the regulator did acknowledge that some providers of retail FX and CFDs are already offering negative balance protection or have pledged to introduce it in the near future. BaFin is giving remaining brokers until August to implement the necessary changes.

Already Covered

For its part, CMC Markets is on board with the changes, which will mandate more concrete negative balance protection mechanisms for clients. CMC has already been offering negative balance protection through its market-leading, proprietary Next Generation platform since last December – it therefore will have no difficulty in maintaining BaFin’s aforementioned proposals and deadline.

Additionally, another provider of CFDs, IG Group, has already been offering its Limited Risk Account in Germany, which is complies with the new rules, including a 'by position' protection to German consumers. Plus500 also welcomed the new level of protection, noting that the changes would have no effect on its business.

The imposition of a deadline and push for more negative balance protection has its roots in the Swiss National Bank crisis back in January 2015, which roiled the FX industry. In that instance, a number of traders ended up owing brokers amounts that exceeded the value of their total assets, placing an enormous level of stress on many groups.