Capping leverage has a dramatic effect on market activity.

Capping leverage at a maximum level of 50:1 for all retail clients and introducing lower leverage caps across different assets according to their risks. The Polish forex trading broker X Trade has reported a significant drop in its shares of 39%. Lately, FCA registers an increase in the number of forex brokerage firms, as well as in the number of retail clients of such companies. The FCA decision to limit the actions of CFD traders has had a dramatic effect on market activity.

The FCA recognises that its consultation forms part of a growing trend across European regulators to impose new standards and restrictions on the marketing of CFDs to retail clients, following a warning by the European Securities and Markets Authority in July 2016 about the risks that complex products such as CFDs pose to retail clients who did not fully understand them. The FCA also proposes drawing a distinction between inexperienced and experienced clients, based on whether a client has active CFD trading experience of 40 trades conducted over at least four quarters in the previous three years, with at least two trades per quarter. Authorized and regulated by the Financial Conduct Authority, Firm No.195355.

But if it had finished 2-1, Mr A would have lost 0.3 times his stake – the difference between the price traded (2.7), and the actual number of goals scored (3). FCA is a body that was set up to regulate financial institutions. Where they are offered legally, they may trade on a regulated exchange or have a market determined by a broker and its back-office operation.

IG started to expand its product portfolio toward traditional products by providing real equity (not CFD) trading for specific citizens (e.g. UK). Even with the recent bans on short selling, CFD providers who have been able to hedge their book in other ways have allowed clients to continue to short sell those stocks. Britain’s financial watchdog proposed tougher rules for retail financial spread betting products known as ‘contracts for difference’ (CFD) after finding that 82pc of customers using them lost money.

Forex trading carries a high level of risk and may not be suitable for all investors. FXCM is one of the biggest forex brokers in the world, licensed and regulated on four continents. The FCA has conducted on-going supervision work since 2009 which has detected instances of poor conduct across the CFD sector.

The FCA notes other examples of member state regulatory action taken toward CFDs, such as a ban in Belgium on the distribution of binary bets, CFDs, and rolling spot FX contracts via electronic trading platforms, and a minimum margin requirement of 1% for retail investments in OTC derivatives in Poland, with a 100:1 leverage limit for both FX and CFD products. As part of its regulatory approach, the FCA proposes to introduce a ban on bonus promotions, which induce retail investors into the market in return for free cash.” The FCA notes that these promotions often have misleading terms and conditions, and any additional cash is added to the client’s margin, making the potential for loss even greater.

Gone are the days when traders could trade with margins between 1% – 2%

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