CMC Markets says in shape for full compliance with BaFin restrictions on CFDs

Maria Nikolova

CMC Markets already offers negative balance protection and will have no problem complying with the new CFD rules in Germany.

As expected, the announcement of the new rules concerning CFD offering to retail clients in Germany has provoked a response from the industry, with online trading firm CMC Markets Plc (LON:CMCX) being one of the first to voice its stance.

In a filing with the London Stock Exchange earlier today, CMC Markets welcomed the outcome of the consultation into the retail CFD industry regulation in Germany.

The company referred to the General Administrative Act published Germany’s Federal Financial Supervisory Authority (BaFin) yesterday. The document restricts the marketing, distribution and sale of CFDs with additional payments obligation. These instruments will no longer be available to retail clients in light of regulatory to concerns of unlimited losses and substantial risks that investors face when the difference to be paid exceeds the capital they have invested, as investors must pay the difference amount from their other assets. Putting it otherwise, the measures demand negative balance protection.

In its announcement today, CMC Markets notes that it already provides negative balance protection through its proprietary Next Generation platform, and, hence, will fully comply with the BaFin proposals.

BaFin is giving CFD providers three months to comply with the new rules, with the deadline set for August 10, 2017. The German regulator said yesterday that some providers already offer CFDs without an additional payments obligation or have, in response to the planned General Administrative Act, announced that they will in future offer such products.

CMC highlights the lack of further changes for clients that have been proposed by BaFin, including no regulator-imposed limitations on margins. This, however, may be a double-edged sword, as a detailed analysis by FinanceFeeds has shown. According to it, imposing an obligatory negative balance protection, accompanied by the lack of leverage restrictions may foster the b-book execution model.

Meanwhile, a crucial set of rules regarding CFD offering to retail clients is expected from the UK Financial Conduct Authority (FCA). The consultation has closed and the outcome announcement is scheduled for the summer.

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