The Federal Financial Supervisory Authority of Germany (BaFin) announced earlier today that it will permanently apply the European Securities and Markets Authority (ESMA) rules for trading CFDs, once the temporary pan- European regulations expire.
The BaFin decision to implement the CFD rules permanently comes less than a month after the German regulator banned the sale of binary options altogether.
The rules regarding the sale of CFDs include a leverage cap of up to 30:1 for forex transactions, as well as a negative balance protection for all traders. The leverage cap for commodities and precious metals like gold and silver are capped even lower at 20:1, while CFDs on stocks and crypto coins will be offered with a maximum leverage of up to 5:1 and 2:1 respectively.
According to the statement announced by the institution, the CFD rules will continue to apply after the temporary measures introduced by ESMA expire in the beginning of August.
“The level of protection in Germany will be aligned with the European standard by means of BaFin’s General Administrative Act,” the institution notes, adding that “in taking this step, BaFin is once again addressing the considerable investor protection concerns expressed at the time of its initial prohibition regarding CFDs with an additional payments obligation, which was imposed in May 2017,”
Justifying its decision Bafin also points out that CFDs carry an “incalculable risk” for retail investors.