Ireland is considering banning Forex and CFDs for retailers

The Irish central bank has published a document in which it is considering a ban on Forex and leveraged CFDs for retail clients. It is another regulator from the European Union that wants to introduce very restrictive measures in the field of the currency market and contracts for exchange rate differences.

We have recently informed you about the decisions of regulators from France, Belgium, Netherlands, Great Britain and Cyprus. Are the actions of the European Union bodies slowly moving towards a total ban on Forex trading in the whole area of ​​the community? Time will tell. Meanwhile, Central Bank of Ireland (CBI), which oversees the domestic financial market, has published a consultation document. The document refers to leveraged CFD instruments. It considers a total ban on offering FX and CFD products to Irish retail customers or the implementation of other measures that will increase trade security. The leading solutions would be definitely the reduction of leverage (even to 1: 25), the introduction of total protection against the creation of a negative balance on the client's account and the prohibition of bonus promotions.

AvaTrade is the largest Irish FX broker

CBI is waiting for feedback from interested parties to 29 May 2017 by e-mail to the address cfdconsultation@centralbank.ie. It is a similar path to that of Great Britain and the Netherlands. Before the changes are introduced, regulators want to conduct a dialogue with investors and brokerage firms. After the decisions are made, it will turn out to what extent it is "to the public" and to what extent is the willingness to negotiate. A total ban on trading would mean Irish brokers fleeing their jurisdiction or shutting down the business. The largest player on the local market is the broker AvaTrade, which has a CBI license, but most of its activities are located in Israel.

Michael Hodson, Director of Asset Management Supervision, CBI:

Michael Hodson, CBI

“CFDs are complex products that are heavily advertised online in the retail environment. The time has come for the Central Bank to act decisively on CFDs where the risk of retail loss is very high. Our ideas are designed to provide stronger safeguards for the benefit of consumers ”.

3 / 4 retail customers are losing

The CBI refers to the analyzes carried out which show that 75% Retail customers who have invested their funds in CFD instruments in the years 2013 and 2014 suffered a loss. The average loss value was 6 900 EUR. It was observed that customers were not fully aware of the risks associated with trade using the lever and the construction of CFD instruments. Lessons learned

The 2015-2016 years' research showed that the percentage of losing customers was similar and amounted to 74% but the average loss was already 2 700 EUR. These are data from the largest retail brokers in Ireland. Nevertheless, the CBI informs that very similar results were also recorded in other EU countries.

Full CBI message (PDF)