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Dutch financial regulator seeks to cap leverage to 1:10 and ban advertising of FX, CFDs and binary options

Feb 21 2017
By
Jonathan Smith

The next EU member state about to introduce stricter regulation of binary options, FX and CFDs is the Netherlands. The local financial regulator - the Authority for the Financial Markets (AFM) - emphasizes on the harm and risks associated with trading financial instruments with leverage of 10:1 or higher. AFM has also organized a consultation on the ban on advertisement of risky investment instruments, such as binary options, contracts for difference (CFDs), futures and warrants.

 

According to the Duch regulator, consumers can quickly lose money when trading in the above-mentioned “toxic” instruments. The proposed ban will affect the following instruments:

 

-          -Binary options;

-          -CFDs with a leverage of 10:1 or higher (or with a possibility of residual debt);

-          -Futures and Turbochargers with a leverage of 10:1 or higher;

-          -Warrants and CoCos.

 

The AMF said that it has decided to subject these instruments to an advertising ban after consulting with other European regulators and market participants. In its view the adoption of various measures by the different European regulators would limit the aggressive advertising of such instruments and accordingly the risks associated with it.

 

Indeed, the Dutch financial regulatory amendments in this sphere come on the background of increased supervisory activity concerning risky instruments throughout Europe. In August last year, Belgium banned the distribution via online channels of over-the-counter (OTC) binary options, spot forex, and CFDs with leverage. France has also banned the advertising of binary options, forex and CFDs with a leverage greater than 1:5.

 

The Cypriot regulator (CySEC) has also been tightened the control on forex and binary options trading. Recently, CySEC proposed the introduction of default leverage of 1:50 and ban on trading bonuses, among other restrictions, all in line with ESMA’s guidelines, published in October 2016. UK’s Financial Conduct Authority (FCA) also undertook measures to cap leverage to 1:50 and prevent forex brokers from offering any form of trading bonuses or benefits

TAGS: Netherlands  regulation  forex brokers  binary options brokers  leverage  adverticing ban 
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