As what could easily be described as the two weeks from hell for Forex brokers. They got some welcome news this week. The German regulator BaFin released its proposed new regulations. The only major issue that was addressed was the requirement for brokers to institute negative balance protection.
BaFin Proposals Were Mild
Relative to the recent proposals from the FCA and CySEC these proposals are tame. It had been long feared that German regulators would follow suit with regulators in France and the Netherlands and institute something much harsher.
No Change in Leverage
Germany is still one of the most attractive markets for Forex Brokers and if they had proposed a marketing ban or leverage reduction it would have mean trouble for many brokers that rely on this lucrative market.
Addressing Negative Balance Protection
It wasn’t too long ago that Forex brokers were struggling with the issue of negative balance protection. Now, after the announcements from the FCA and CySEC eliminating bonuses and reducing leverage, brokers are more than willing to accept this concession from German regulators.
BaFin Taking A Practical Approach
BaFin is taking a far more practical approach than their European counterparts. The issue of negative balances is one that needs to be addressed and could prevent another Swiss Franc disaster. This move will also force forex brokers to take a more proactive approach to risk management and protecting their clients at the same time.
A New Approach To Forex Regulation
It is refreshing to see that regulation can benefit both the broker and the trading public. Most of the times regulators are responding to complaints and being reactive. All too often the response by regulators is to either band something or to make it uncompetitive to force the brokers to move elsewhere. BaFin has determined that these products are here to stay and that they’re willing to work with brokers in looking out for the best interest of the trading public.