Breaking: CySEC Bans Retail Brokers Bonus


In a new circular released today, CySEC bans Retail Brokers Bonus and mandates a 1:50 leverage as a default for new clients of CIFs. What are the next steps CIFs have to take? AtoZ Forex has outlined them below.

30 November, AtoZForex – Today, CySEC issued a circular to all Cyprus Investment Firms (CIFs) to halt any new bonus promotions. CySEC has attempted since 2015 to increase the transparency on the risks of bonus promotions. However, in today's circular CySEC bans retail brokers bonus, while mandates CIFs to offer its clients a lower leverage limit.

CySEC Bans Retail Brokers Bonus

CySEC stated that CIFs must stop offering bonuses which are designed to motivate clients to trade in complex products such as CFDs, rolling spot forex, and binary options. Considering that these companies can’t demonstrate they act professionally, fairly, and in the best interest of clients with these trading benefits. Moreover, CySEC stated that CIFs must not launch any new bonus schemes to retail clients starting today.

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In the meantime, CySEC does not require CIFs to remove its existing bonus schemes, once they expire it will mark the end of the trade benefit. Additionally, CySEC Chair Demetra Kalogerou stated;

“Offering bonus promotions to encourage and incentivise trades in complex or speculative products risks exposing retail investors to undue risk. Since early 2015, CySEC has monitored CFD, binary options and rolling spot forex providers very closely to ensure firms are acting in the best interests of retail clients. In many cases, they are not. This is not acceptable.”

What CIFs should do next?

CySEC mentioned that all CIFs must declare if they are offering such bonuses or not. CIFs are requested to do so by completing and submitting a table to the email address supervision@cysec.gov.cy by latest December 14, 2016. The table requires CIFs to fill in a general description of the bonus schemes and when it ends.

Also, CIFs that does not offer such bonuses should also fill in and send the table indicating N/A. Furthermore, CySEC mentioned that CIFs must notify CySEC of any new type of trading benefits they intend to offer to retail clients. Adding that the notification must take place before the launching of the trading benefit to the market.

CIFs should offer clients lower leverage limit

As a part of the ESMA directives on fair treatment of clients, CySEC instructed CIFs not to allow clients to use “excessive leverage”. Excessive means more than 50:1. The Cypriot regulator mandates a lower leverage limit as a default for new clients of CIFs. The option to change the default to a higher leverage should come as an option for the clients of CIFs. CySEC mandates that the broker's lower leverage limit is reasonable and does not exceed the cap of 1:50.

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