Exclusive: Spanish Regulator Mandates Big Changes for Forex and CFDs Brokers

The crackdown on foreign exchange and binary options brokers across the European Union is continuing. The latest set of measures comes from Spain, where the country’s national regulator, Comisión Nacional del Mercado de Valores (CNMV), issued a communique to companies from the industry.

A copy of the document obtained by Finance Magnates shows that the watchdog is mandating material changes for brokers. Every 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, CFDs and binary options provider with Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term higher than 1:10 has to include additional risk warnings for retail clients.

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A Screen of Warning Signs

Every time a client opens an order or position some confirmation dialogues should be displayed. Here is an approximate translation from Spanish:

“You are about to acquire a product that is not simple and may be difficult to understand: insert name of the product. The CNMV considers that due to the complexity and high risk, the product is not suitable for retail investors.”

In the case of leveraged products, there is an additional disclaimer:

“The product you are about to acquire is a product with leverage. You should be aware that the losses acquired via trading this product may exceed the amount that is required to open the position.”

The brokerage is also required to evaluate every client’s suitability for trading such instruments, which is an already existing rule. The news here is that every client that fails the suitability test will have to manually confirm with letters: “This product is complex and the CNMV considers it unsuitable for me.”

In many cases, the changes described above may be difficult to implement. Brokerages that rely on third party technology providers might have to commit additional resources to streamline the process. Companies only have a month to comply with the new requirements if they wish to continue operating in Spain.