Plus500 has issued an official statement that highlights that the company is fully compliant to offer and market its products in Germany. The German financial regulator, BaFin, issued an announcement yesterday, stating that companies that do not offer negative balance protection can not market their contract for difference (CFD) products in the country.
The advertisement ban is focused on CFD products that carry risk of additional losses to the amount a client has deposited on his brokerage account. Such products have been deemed dangerous for retail investors by the German regulator.
BaFin’s decision comes in the aftermath of the 2015 black swan event. At the time a number of brokerages chose to go after the negative balances of several of their clients that carried losses from the Swiss National Bank-induced volatility that wrong-footed a large number of retail traders in EUR/CHF.
As brokers went on to seek recovery of their clients’ negative balances, regulatory attention was focused on the issue and the German regulator is stepping in to protect the interests of retail clients.
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Companies will have to be protected from negative balances when trading with their retail broker.
Plus500 noted in its announcement that the news from BaFin is welcomed and that all accounts offered by Plus500 have always had negative balance protection.
“The Company therefore believes that any limitations imposed by BaFin in this respect will have no effect on its business,” the CFDs provider concludes its statement.
Last night IG Group was the first brokerage to issue a statement on the matter, clarifying that it is already offering such a product for its clients.