The UK Financial Conduct Authority (FCA) will adopt ongoing rules for trading Forex, CFDs and similar CFD options, the regulator announced Monday.
The rules are similar to those introduced by the European Securities and Markets Agency (ESMA) in August last year and will come into effect on August 1 for all CFDs and September 1 for all options like CFDs.
Most of the rules are already well known both to traders and their brokers – the maximum leverage will be limited in the range from 1:2 to 1:30 depending on the underlying asset, brokers will have to close their clients’ positions when their funds fall to 50%. From the required margin, traders will need to receive protection from a negative balance, that is, they will not lose more money than they have deposited, and, finally, trading bonuses and all non-monetary benefits that a broker can offer will be prohibited.
Also, brokers will need to publish risk warnings similar to those indicated on packs of cigarettes, where it should be clear what percentage of their customers lose money.
Companies from the European Economic Area – all EU countries, as well as Norway, Switzerland, Iceland and Liechtenstein, with access to the British market, will also have to comply with the new rules.
FCA’s intervention followed “evidence that firms are actively promoting CFDs for the general public, which means retailers are buying products that don’t suit them”, said Christopher Woolard, FCA’s executive director of strategy and competition.
“We saw how firms offer CFDs with ever-higher leverage, with the result that most consumers lose money. EU rules are temporary. The new rules support and strengthen consumer protection”, – he said.