The European Securities and Markets Authority (ESMA) has made a strong announcement warning retail investors to be wary of unregulated Forex brokers. The regulator, which is based in Paris, wrote a detailed paper on the subject after investors claimed huge losses in FX and CFD (OTC products).
The report is more of a ‘how to guide’ for retail investors giving them information on FX, how markets fluctuate, leverage and even trading via an online platform.
Undoubtedly an important reminder for investors who are not familiar with the dynamics of OTC margin products.
Most FX brokers in the EU are regulated with some authority; Cyprus and Ireland have been the notable locations after UK’s FSA and Germanys BAFIN.
The report has key messages which include:
• Do your homework: check if the firm is authorised.
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• Don’t use money you can’t afford to lose; you could lose more than your initial investment.
• Be aware that some product or service offerings could be misleading.
• Know the risks involved.
The report has come when the European Commission has been discussing the Tobin Tax and MIFID 2. Forexmagnates team will be discussing MIFID 2 in the next quarterly report.