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Will FCA introduce Forex bonus ban and leverage cap in April 2017?
09/03/2017
Will FCA introduce Forex bonus ban and leverage cap in April 2017?

Will FCA introduce Forex ban and leverage cap as it was planning before? The regulator has received 4,000 submissions in relation to earlier proposition.

9 March, AtoZForex  The Financial Conduct Authority (FCA) of the UK received more than 4000 submissions on its proposal to introduce a new framework for Forex and CFD trading. In December 2016, the FCA has proposed a new limiting policy for the firms selling CFDs and Forex to retail customers. This proposal includes a hard 50x leverage cap for trading CFDs and Forex and a ban on bonus enticements to retail customers. March 7, 2017, was the last date for third party comments and submission on the proposals.

Will the number of submissions delay FCA Policy Statement?

Looking at a large number of submissions, the UK watchdog will have to deal with them in order to review the submissions. As a result, the regulator will take a little longer than expected to come to conclusions and finalize the new rules. Initially, the FCA was targeting late April, but considering the voluminous responses, they do not anticipate to be out with their conclusions for about couple of months. The FCA aims to publish a Policy Statement confirming final FCA Handbook rules in spring 2017 with a view to these rules coming into force shortly afterward.

Will FCA introduce Forex ban and leverage cap as planned?

It seems that there might be some flexibility on the leverage cap. Similar to the recently instituted by the Cypriot regulator CySEC, it could take the form of a more relaxed cap, either in the 100x range or a soft 50x cap. The soft cap mandates 50x as the default leverage to be offered to all clients. Furthermore, it allows for higher leverage to experienced traders on request with certain other terms and conditions to avoid abuse of high leverage.

As per the consultation paper CP16/40, FCA mentions that there is a prohibition on bonus promotions. In other words, the UK watchdog will prevent entities from using any form of trading or account opening bonuses or benefits to promote their CFD products and platforms. Hence, it seems that bonus ban is just one step close as far as the regulator is concerned.

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