BaFin Publishes CFD Marketing and Distribution Guidelines


The German Federal Financial Supervisory Authority (BaFin) has published guidelines on general provisions under Article 42 (MiFIR) regarding Contracts for Difference (CFDs). The guidelines are for CFDs providers to comply with marketing, distribution, and sales requirements and avoid regulatory violations.

02 September, 2020 | AtoZ Markets – BaFin is a German financial regulator and is responsible for ensuring the German financial system’s stability and integrity. Moreover, Bafin is one of the largest EU regulators. It is an independent federal agency with headquarters in Bonn and Frankfurt. BaFin also oversees approximately 2,700 banks, 800 financial services institutions, and over 700 insurance companies.

Guidelines for CFD Providers on Marketing, Distribution, and Sale

Germany is now the fastest-growing market for CFDs. The number of CFD providers opening offices in Germany is also increasing due to the European Union (EU) regulation entitled the Financial Instruments Market Directive (MiFID).

BaFin has published guidelines for CFD providers to adapt their CFD marketing, distribution, and sales practices to the Financial Instruments Act’s provisions and avoid any conflict with the regulations. CFD trading guidelines in Germany regarding marketing, distribution, and sale also include:

  • Leverage limit
  • Essential margin closure protection
  • Essential negative balance protection
  • Prohibition of granting monetary and non-monetary advantages
  • Direct and indirect notifications on the marketing containing a standardized risk warning including a provider-specific loss rate

According to the guideline, “All direct and indirect communications from a CFD provider regarding the marketing, distribution, or sale of CFDs must contain a corresponding risk warning. The inclusion of a risk warning in the respective terms and conditions is not absolutely necessary.” However, the requirements for risk warning extend to smartphone apps and videos, and social media messages. These risk alerts for retail investors must be prominently displayed.

Moreover, BaFin limited marketing, distribution, and sales of CFDs to general orders because of serious investor protection concerns. BaFin also said it continuously monitors compliance with product interventions. However, regulatory violations are administrative offenses and may result in fines.

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