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#1 22-02-2020 13:58:55

Admin & Trader
From: Paris - France
Registered: 21-12-2009
Posts: 3050

The FCA affirms that its intervention helps lower trader losses

The FCA affirms that its intervention has helped diminish traders' losses
The United Kingdom's Financial Conduct Authority recently released its annual "Sector Views" report, which assesses the risks and potential losses suffered by traders.

The report highlights ongoing concerns about high-risk trading products, but the FCA notes that its interventions have helped address several issues in the contract for difference (CFD) market.

The Financial Sector Supervisory Authority intervened to remedy the damage suffered by the sector by limiting the way in which companies market, distribute and sell these products to retail traders. Remember that these restrictions limit leverage between 2:1 and 30:1 by collecting a minimum margin as a percentage of the overall exposure that a CFD provides. The measures also introduced the closing of a position when a trader's funds fall to 50% of the margin needed to keep their positions open on their trading account.

Before the interventions (i.e. the ESMA intervention which also applied to the United Kingdom since 2018, and the national measures introduced by the FCA), it was estimated that 800,000 active trader accounts held a total of 1.4 billion. The FCA has estimated that, overall, individual traders lose 1.06 billion a year trading these products. Following the introduction of leverage limits and other investor protection measures, the total losses of individual clients of UK brokers decreased by 78 million between July and September 2018.

The FCA estimates that its final rules will save individual traders between 266 and 449 million a year.

The regulator notes, however, that individual traders are still in danger and that they must be vigilant, as some CFD brokers encourage them to opt for an "optional professional status" or to contract with affiliate entities in foreign countries to circumvent the restrictions on leverage introduced by the FCA.

High risk investment products expose traders to more risk than they can absorb - some of the riskiest products are often marketed directly to retail traders with a lack of information on the risks involved.

Christopher Wolard, FCA Executive Director, says: "What is clear from the industry views is that many of the harms we see are caused by a significant number of small businesses that we regulate or by businesses that are outside of our jurisdiction."

Regarding investments in cryptocurrencies, the FCA estimates that as of the end of last year, less than 14 spot exchanges of crypto-assets were headquartered in the UK, in a global market of over 249. The FCA analysis suggests that these exchanges represent less than 4% of trade in this market. The regulatory authority has warned of the risks of buying unregulated cryptocurrencies.

"Anything worth having is worth going for - all the way." - J.R. Ewing



#2 16-03-2020 10:17:56

From: United States
Registered: 15-03-2020
Posts: 3

Re: The FCA affirms that its intervention helps lower trader losses

They should keep up the good work.



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