JFD Brokers, a company that has been providing DMA/STP foreign exchange and CFDs trading services to retail and institutional clients is introducing negative balance protection. The Cyprus Securities and Exchange Commission (CySEC) regulated broker is revamping its offering at a critical time for the industry in Europe just as regulatory scrutiny against brokers is increasing.
Last year a number of regulators introduced changes designed to better protect clients. CySEC focused on milting leverage and defaulting the choice for clients to 1:50. The regulator also requires clients that wish to use higher levels of leverage to adhere to the conditions provided in a separate questionnaire.
UK’s financial regulator, the Financial Conduct Authority (FCA), is also exploring changes to the rules that govern retail brokers. The watchdog announced in December that it is preparing to limit the maximum leverage clients can use to 1:50.
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In Germany, the local enforcer of financial conduct, BaFIN, introduced another step to protect consumers – mandatory negative balance protection.
Overcoming the Challenges
As many brokers discovered during the Swiss franc black swan that hit the FX markets in January 2015, maintaining negative balance protection can be difficult. JFD Brokers is protecting its clients and itself in a number of ways.
The company is maintaining a responsible leverage policy and is constantly reviewing instruments and taking action according to implied market volatility. JFD is adhering to very conservative stop out and margin call levels and is monitoring closely the risks on client positions to market volatility.
The CEO of JFD Brokers, Lars Gottwick, commented to Finance Magnates: “As a leader in transparency, we welcome with open arms the current regulatory changes in regards of leverage, bonus schemes and negative balance protection. We believe that these regulatory changes are completely supporting JFD’s business model.”