FRANKFURT Dec 8 Germany's financial regulator
on Thursday announced new rules to curb spreadbetting, becoming
the latest European regulator to clamp down on the fast-growing
industry in which most retail investors lose money.
Watchdog Bafin said it intends to ban the sale of one of the
most popular financial betting products - known as a contract
for difference (CFD) - to retail customers if the CFDs include a
so-called additional payment obligation.
"In the case of CFDs with an additional payments obligation,
the risk of loss for the investor is incalculable," Bafin Chief
Executive Director Elisabeth Roegele said.
"For consumer protection reasons, we cannot accept that,"
The country's financial watchdog had already announced plans
for the ban this summer.
CFDs let investors bet on both the direction a share price,
currency or other financial product will move, and the extent of
the change in price, and there is no stamp duty.
The industry is regulated by European Union rules which have
no caps on leverage. That means investors can take out bets that
are far larger than their initial outlay, offering greater
potential returns but also running the risk of huge losses.
An additional payment obligation forces investors to pay for
losses that exceed the balance of their CFD accounts from their
other assets, thereby transferring the risk to other market
Thursday's move came after three UK-listed spread betting
companies saw their share prices plunge by more than a third on
Tuesday after Britain's Financial Conduct Authority said it
planned to bring in new rules for the sector.
IG Group, one the largest global providers of spread
betting, has seen its share price slide around 37 percent this
IG said in a statement on Thursday it considered the German
proposal to be in line with its recent introduction of special
accounts that are meant to prevent clients from incurring losses
in excess of the amount deposited in their account.
The company said it would meet Bafin representatives, who
have allowed until January 20, 2017 for consultations on the new
In recent months, several countries across Europe, namely
France, Belgium, Poland and Malta, have moved to ban CFD trading
and the Netherlands is considering a similar measure.
In the United States, over-the-counter CFD trading is
prohibited for retail clients unless the investor has a minimum
investment capital of $10 million and $5 million solely for
hedging purposes in CFD trading.
(Reporting by Tina Bellon; Editing by Alexandra Hudson)