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 protections, intervening on behalf of retail clients.
Earlier this week, BaFin issued an announcement that introduced more specifics about its retail forex 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.
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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.
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.