FRANKFURT, May 8 (Reuters) - Germany’s financial watchdog BaFin on Monday said it would clamp down on the marketing, distribution and sale of financial contracts for difference (CFD‘s), making use of sweeping new consumer protection powers.
BaFin voiced “significant investor protection concerns” regarding CFDs and some of the additional payment obligations contained in such contracts which can result in clients losing all of their assets.
“By restricting trading in CFDs we are making use for the first time of the product intervention option,” BaFin’s Executive Director Elisabeth Roegele said in a statement.
“For consumer protection reasons, we cannot accept that. The restriction of CFD trading is therefore a necessary step to protect retail investors”, Roegele said.
Providers of CFDs with an additional payments obligation have three months from the date of publication of the General Administrative Act to adjust their business models, BaFin said.
CFDs are arrangements between two parties which speculate on the price performance of a certain underlying asset, such as shares, indices, currency pairs or interest rates.
In December Bafin signalled it wanted to limit CFD trading. (Reporting by Edward Taylor; Editing by Harro ten Wolde)