Breaking: Ireland Prepares Action to Protect Retail Investors in CFDs and FX

The Central Bank of Ireland is preparing action to revamp the 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 offering to retail clients. The financial supervisor in the country has issued a consolation paper that is focusing on the issues related to financial trading products for retail investors.

Focusing on CFDs products, the Bank of Ireland is stating that it is preparing action to tackle the high risks for retail clients. The authority is looking for feedback from clients and brokers alike.

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The Irish watchdog is proposing two measures to limit the losses of retail investors when trading CFDs - an outright ban or a hard limitation on leverage and 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 protection.

75% of Clients Losing

The clients that deposited real money to trade FX and CFDs lost about €6,900 per person on average. According to an inspection conducted by the Bank of Ireland, 75 percent of clients lost money over 2013 and 2014. The figures dropped to 74 percent of clients and an average of €2,700 over 2015 and 2016.

The regulator is highlighting that the risks associated with trading have not been adequately understood by clients of CFDs brokers.

Measures proposed by the Central Bank of Ireland are consistent with other European regulators like the French AMF, German BaFIN, and the UK’s FCA.

MiFID II Product Intervention Powers

With the incoming implementation of the MiFID II regulatory framework, which is effective from the 3rd of January 2018, national regulators in the EU will have the power to limit the offering of certain products within their jurisdictions.

The regulatory framework is presenting a big challenge for retail FX and CFDs providers that are dependent on offering their products in the European Union.

Other national regulators that receive a substantial enough amount of complaints are likely to take further action against retail FX and CFDs providers.