The French Parliament has just voted to ratify the ‘Sapin 2’ bill that is aiming to hand certain powers to the French Ministry of Finance in order to limit the advertisement of risky products. The bill won’t take effect until it is published in the country’s national law paper.
After the publication, the French Ministry of Finance will designate the French financial services regulator, the Autorité des Marchés Financiers (AMF) with the mandate to filter out which products are deemed dangerous for retail investors.
“Financial derivatives such as CFDs and rolling spot forex products are deemed as high-risk investments by financial watchdogs across the globe. As markets have evolved through technological advancements and have matured, the regulators should be open to ways that these products can be offered and supervised in a fair and efficient manner,” explained Adil Saddiqui, Director of ThinkMarkets.
The French regulatory authority intends to limit the leverage on forex and CFDs trading. For the industry, the key aspect of the decision of the Autorité des Marchés Financiers is what is the cap that retail traders in France will be capped at. The first stance of the AMF was that it could limit the margin requirement to a minimum of 20% or 1:5.
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Such a level would effectively kill the French forex and CFDs trading industry. The French regulator invited the industry that is going to get affected by the limitations to a period of consultation. Companies operating in France and their clients have submitted answers in response to the proposal by the AMF.
“The regulators should position their focus on supervisory aspects such as making sure that providers are clearly informing users of the key components of the products with the relevant risk warnings, and ensure they are appropriate for them. Authorities should address the needs of the market and implement a well-governed and supervised environment that can give investors choice and diversity, but at the same time safeguard their interests,” Mr Saddiqui elaborated.
Implementation Not Before Mid-December 2016
Sources familiar with the procedure shared with Finance Magnates that the limitations on the French retail trading industry are not expected to get implemented before the middle of December or in January 2017.
Commenting on the news to Finance Magnates, the Business Development Manager of Cappitech, Ron Finberg elaborated: “The decision about the marketing ban isn’t surprising given that France has long been a target of both regulated and unregulated forex and binary options brokers. Many of the crazy stories you hear about account managers using software like Team Viewer to control their customers and charge client credit card for thousands of dollars are about French traders.”
“What I am watching is how this effects broker decisions on becoming regulated. At Cappitech we receive many enquires about our regulatory solution from longstanding unregulated brokers who have decided they need to be licensed in the EU due to tightening credit card and compliance reasons. However, if you now can’t market everywhere in the EU, it could decrease the overall worth to be regulated,” Mr Finberg added.
The regulators should position their focus on supervisory aspects such as making sure that providers are clearly informing users of the key components of the products with the relevant risk warnings, and ensure they are appropriate for them. Authorities should address the needs of the market and implement a well-governed and supervised environment that can give investors choice and diversity, but at the same time safeguard their interests.