Belgium’s market regulator, the Financial Services and Markets Authority (FSMA), has announced a decree prohibiting retail online trading of forex and CFDs, starting from August 18, 2016. In compliance with the above, regulated brokers will no longer be accepting clients from Belgium.
Belgium Prohibits Forex and CFD Trading for Retail Investors
Belgium gained notoriety in 2016 for its strong stance against internet trade of any kind. The Belgian market regulator – the Financial Services and Markets Authority (FSMA) – issued an order prohibiting contracts for difference and retail forex trading. The verdict shocked the trading sector when it went into effect on August 18, 2016.
The FSMA expressed concern about the dangers linked with these highly speculative products. Forex and CFDs enable traders to speculate on fluctuations in prices in currencies, commodities, stocks, indices, and other risky markets.
Often with significant leverage! Leverage can increase earnings. It can also cause substantial losses – especially for new traders.
Belgian regulators were increasingly concerned about the many ordinary investors. Many had suffered significant losses in these marketplaces over the years. According to the FSMA – most retail traders lose money in the FX and CFD markets. These markets are complex, and not everyone can navigate them.
They also noted that these products were often aggressively pushed online. This causes many new investors to invest without fully knowing the hazards involved.
As part of the ban – Belgian-regulated brokers can no longer sell these products to ordinary investors. The action attempted to safeguard regular investors from what the FSMA called – excessive speculation. The authorities highlighted that – forex and CFDs – were unfit for the common individual. They are complex and perilous.
The order also outlawed some marketing strategies:
Aggressive marketing: Online brokers could not use pushy marketing to steer regular traders into highly risky derivative products.
The new rules also prohibit: bonuses, promotions, and other incentives meant to draw in new traders.
Who is affected: reputable forex brokers and regulated CFD providers.
The prohibition drew varied critiques. Many financial experts agreed with the decision. They state that regular investors need stronger protection from the volatility and hazards associated with leveraged securities. They also said that most ordinary traders lacked the knowledge to understand the complexity of the FX and CFD markets.
Others, however, saw the action as too restrictive. Critics argued that outright bans on the products were an overreaction. They contended that rather than a full prohibition, Belgium might have imposed stronger controls. They include restricting leverage or ensuring that traders obtained enough knowledge before participating in these markets.
Despite the differing viewpoints, Belgium’s ruling established a precedent. It was among the first European nations to impose a full ban on retail FX and CFD trading. This decision has spurred debate in other nations about how to effectively regulate internet trading to safeguard ordinary investors.
Following the restriction, several brokers stopped taking customers from Belgium. Regulated enterprises were required to comply with the FSMA’s directive. This, in turn, prohibited the opening of new retail accounts for Belgian citizens.