Central Bank of Ireland declares CFDs ban on distribution


Central Bank of Ireland declares CFDs ban on the sale and distribution to retail clients in Ireland, according it’s latest consultation paper. Was the central bank inspired by the actions of the FCA?

06 March, AtoZForex  Central Bank of Ireland declares the ban on sale and distribution of CFDs. The Central Bank has linked the growing group of regulators seeking to control the distribution of high-risk financial instruments. Starting with the FCA previous year, when the UK regulator introduced the leverage cut on CFDs. Eventually, the news inflicted a decline in the shares of IG.

Another recent case is that of the Dutch regulator, the AFM plans to introduce the ban of marketing of CFDs, Binary Options and Forex. In the case of the Irish regulator, the Central Bank of Ireland might be up for banning the distribution of CFDs. Accompanied by curbs of marketing of CFDs.

Central Bank of Ireland declares CFDs ban

CFDs can offer investors big rewards but also huge losses. Also, a research in 2016 shows that 75 % of the retail clients lost their money using this product, with an average loss of approximately € 2,700. Moreover, the Central Bank of Ireland has also published a Consultation on the protection of retail investors in relation to the distribution of CFDs. Furthermore, the options outlined in the document is the ban on the sale of CFDs. Along with the implementation of enhanced investor protection measures.

Enhancing investor protection measures

Leverage Limit – a maximum leverage limit of 25:1 is composed to be set for retail clients trading all financial CFDs.

Negative Balance Protection –  a guaranteed stop loss is used to limit negative balance on a position basis.

Bonuses and other Promotions – The firm has prohibited any form of offering and trading incentives or account opening bonuses to retail clients in order to stop their widespread misuse.

Risk Disclosure – All firms offering CFDs to retail clients are set to be required to conspicuously display standardized risk warnings.

Michael Hodson, director of asset management supervision at the Central Bank, said:

“CFDs are complex products which are widely advertised to the retail mass market in an online setting. The decisive action in relation to CFDs given the evidence that the probability of loss for consumers is very high. ”

Last but not least, read the Consultation Papers 107 for more information:

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