Dukascopy Europe introduces protection against negative balances

Dukascopy Europe together with 10 August this year introduces protection against negative balances on the invoice (so-called Negative Balance Protection) for all of its clients. No need to repay the debt that will appear on our investment account will be absolute, i.e. independent of its amount.

Investor protection above all

Amendments to the law and regulations regarding financial institutions throughout the European Union are constantly moving towards increasing the protection of retail investors. German supervision, BaFIN, introduced the obligation to guarantee the inability to create a debit by all brokers offering their services in their country. The new regulations came into force also 10 August this year, which may explain the movement on the part of Dukascopy, which is present on the local market from the very beginning.

Speculations about the introduction of a similar requirement by the British regulator do not diminish. The United Kingdom has the largest share in the European Forex market, and its main brokerage institutions operate on its territory. This type of change could trigger an absolute revolution in the Forex market.

ECN broker and no overdraft?

You may have doubts about the appropriateness of introducing protection against negative balances by brokers offering trade in the ECN model. One does not have to think for a long time about who the risk is transferred with, if necessary, the repayment of indebtedness to liquidity providers. However, on one side we have full customer concerns and new regulations, and on the other hand, business calculations and the need to withdraw from key markets. Without an effective strategy to protect against customer abuse or their ill-considered investment decisions, protection against debit can turn out to be a double-edged weapon.

Be sure to read: Protection against negative balances. Safety or shot in the knee?

Dukascopy was one of the few brokers who after the memorable Black Thursday (15 January 2015), canceled the traders' debt. This decision was dictated primarily by the fact that the share of customers who passed the debit was almost negligible effective hedging mechanisms and a deliberate policy to reduce leverage on highly risky instruments.

It is not a secret, however, that retail traders after these memorable events more and more often began to look for brokers who first of all they will ensure that they do not have to repay the debits created on their accounts.