Social psychologists highlight manipulative tactics used by Forex, binary options firms

Maria Nikolova

A study by scientists at the University of Aix-Marseille shows online trading firms’ sales teams use tactics like “foot in the door” to manipulate clients.

Just a couple of weeks have passed since the French Financial Ombudsman published her annual report for 2016, showing a raft of complaints by French investors about being harassed by Cypriot investment firms. Adding to the topic, France’s financial markets regulator AMF today published a study by two scientists at the Laboratory of Social Psychology at the University of Aix-Marseille.

The analysis examines the psychological tactics used by representatives of online trading firms (Forex and binary options brokers) when communicating with potential and existing clients. The study was based on: testimony of 24 traders, that is, clients of online trading companies; communication materials (emails, Skype chats, phone calls, traditional mail), and 110 ads uncovered by the AMF during its conventional surveillance procedures.

The analysis details dozens of psychologically manipulation tactics used by sales teams of brokers. Most of these tactics tap into social norms and conventions, which make people easily susceptible to suggestions. For instance, people that receive a gift feel obliged to repay somehow – that is why, offering them a bonus makes them feel obliged to the broker. This is an example of abuse of the so-called “reciprocity rule”.

The “foot in the door” implies asking for something small before asking for something big. One client was first asked to invest EUR 250 and, after a couple of days, was contacted again to add extra EUR 450.

Football sponsorships and advertising using sports legends counts on the so-called “attractiveness of the source” and makes any claims plausible. This is an ancient trick known as “argumentum ad hominem” – if an expert says it, then it must be true…. AMF stresses that sports partnerships that seek to advertise high-risk financial products are prohibited under the Sapin 2 law.

Concerning the content of FX/binary options advertisements, an AMF analysis of ads during 2016 showed that 30% of them focused on education claims, whereas 25% focused on the promises of fast profits. Education promises are treated as a form of marketing by the AMF and are covered by the ban included in the Sapin 2 law, the regulator explains.

FinanceFeeds has recently noted the rise in unfounded educational services promises by unregulated binary options firms. For instance, the RED List, or Registration Deficient List, composed by the Commodity Futures Trading Commission (CFTC), currently includes 111 names of binary options and FX firms that are foreign entities acting in an unregistered capacity, that is, they have no permission to target US customers. All of the binary options firms featured on the RED List are offering “education” services to their customers.

In conclusion, let’s mention some numbers. In the beginning of 2017, complaints regarding Forex and binary options brokers represented 30% of all of the complaints received by the AMF Investor Center. This compares with a proportion of 40% in the beginning of 2016. Despite the fall, AMF notes that the number of complaints concerning online trading companies remains high.

Read this next

Retail FX

Banxso announces 8.7% interest rate on deposits in South Africa

“With Banxso, they can enjoy the benefits of both worlds – earning competitive interest and having the freedom to trade, all within the same platform.”

Industry News

FINRA to publish transaction details in U.S. Treasury securities

“Consistent with our longstanding practice, FINRA is introducing greater transparency in a calibrated and careful manner, benefiting liquidity and resilience in this critical market while also mitigating potential information leakage concerns.”

Institutional FX

OpenYield launches “cheap and easy” fixed income trading for brokers

“We’re on a mission to make bonds cheap and easy to trade, and are excited about the opportunity to build generational capital markets infrastructure.”

Digital Assets

Sumsub and Mercuryo publish a guide for VASPs: “Mastering Travel Rule Compliance”

“At Sumsub, we’ve concentrated our efforts on filling the gap in understanding the complexity of Travel Rule regulation and helping organizations find the best solution to stay safe and compliant while minimizing costs and avoiding potential risks of non-compliance. This guide we created with Mercuryo, our trusted partner, is the ultimate navigation tool all VASPs can consult.”

Digital Assets

Bitget Wallet Leads with Record Swap Volume & New Crypto Innovations

This week, Bitget Wallet achieved a milestone by surpassing Metamask with a record 388,757 Swap order transactions, securing the global lead. The significant 7-day trading volume, almost 68,000 more than its rival, underscores its liquidity and user trust. This robust activity signals Bitget Wallet’s prominent role and reliability in the dynamic crypto market.

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

<