BaFIN: Protection against debit on uniform terms

German financial supervision, BaFIN, in August this year. year he imposed the obligation to guarantee protection against negative balances by companies that want to stay on that market. This time the regulator issued a new message with a set of guidelines for the provision of services in the field of trade on CFDs. This document is addressed to Forex brokers who serve retail traders.

FX brokers under the watchful eye of BaFIN

The German order and order must also be reflected practically on the financial markets. The regulator after three months decided to re-x-ray the Forex retail industry. Due to the fact that a number of inaccuracies were encountered regarding the new guidelines, it was decided to arrange all issues in a new document.

The most important issue is to clearly show clients that brokers operating on the German market (as well as those companies that want to enter it and / or obtain a BaFin license) do not charge any additional commissions or fees in the event that the client's account becomes indebted, i.e. overdraft. Any indication of the need to regulate it through phrases such as "additional payment obligations", "deficit", "shortage", "negative balance", "difference" and the like are not allowed. But that's not all.

Everyone is to be treated equally

The BaFIN document is a reaction to attempts to bypass new regulations by brokers. Often, companies decided to implement protection against debit, at the same time burdening them with a whole list of additional conditions that should be met in order for this protection to actually work. Consequently, this guarantee would only be applicable in certain cases.

The German regulator scores:

• Brokers, in terms of guaranteed protection against debit, must treat all clients equally. There can be no exclusions depending, for example, on the type of account or the value of the deposit.
• Brokers must adapt their marketing materials and risk regulations to a form in which there will be no doubt about the protection provided against the negative balance. The regulator indicates that the guarantee of execution of Stop Loss orders is not sufficient (in fact, the SL itself does not guarantee protection against debit).
• The guarantee that there is no need to settle the debit and that the customer will not be charged any fees must be unconditional. Exclusions due to any conditions such as "exceptional" market conditions, strategies used by traders or the amount of the deposit are not allowed.

You have to see: Forex brokers and negative balance protection - 2017 statement

More and more brokers decide to implement protection against debit. In order to remain competitive on the scale of the continent, they do not wait for the decisions of ESMA or local regulators. This year, without top-down guidelines, they decided to take such a step, e.g. XTB and Dukascopy.