The Central Bank of Ireland is preparing action to revamp the retail Forex 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 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.
