IG claims no problems with Germany’s new CFD rules

Maria Nikolova

IG is set to have no problems with the new CFD rules in Germany thanks to the Limited Risk Account it offers to German clients.

Yesterday’s publication of a General Administrative Act by Germany’s Federal Financial Supervisory Authority (BaFin), outlining new rules for the offering and marketing of CFDs to retail clients, has been triggering a wave of responses from the online trading industry, with IG Group Holdings plc (LON:IGG) the next in line to comment on the regulatory order.

In a filing with the London Stock Exchange published earlier today, IG Group voiced its supportive stance on the measures outlined by BaFin. The company is set to have no compliance issues with regards to the restrictions on CFDs with additional payments obligation, given that it already actively markets its Limited Risk Account in Germany. This type of account is compliant with the new rules and also provides additional ‘by position’ protection.

The document issued by BaFin yesterday restricts the marketing, distribution and sale of CFDs with additional payments obligation. These instruments will no longer be available to retail clients given regulatory concerns about the 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 regulator requests negative balance protection for retail clients of CFD brokers.

Also today, another CFD broker which targets German retail customers – CMC Markets, welcomed the new rules. The company said 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 adjust their business models in order to comply with the new rules, with the deadline set for August 10, 2017. The German regulator said yesterday that a number of providers already offer CFDs without an additional payments obligation or have, with regards to the planned General Administrative Act, announced that they will start offering such products in the future.

Do the new rules drafted by BaFin have a disadvantage? For a detailed analysis into the consequences of implementing such restrictions, check out this FinanceFeeds’ article.

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