LONDON, Nov 30 (Reuters) - Cyprus’s financial regulator CySEC issued a warning to the mass of retail currency brokers registered on the island on Wednesday over their use of bonus schemes to encourage trading in risky products and related poor treatment of clients.
The circular, referring to an 80-page guide for regulators and other sector stakeholders issued by European authorities last month, underlined that players must avoid using bonus schemes to incentivise trading in contracts for difference and other of the highly-leveraged products small traders use to make bets on moves in currencies and other liquid assets.
CySEC chair Demetra Kalogerou said in an email to Reuters that ”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.
“Our aim here is to put a stop to the abuse of the honest, fair and professional principle which must govern firms’ operations, and in most cases do.”
Many retail traders have protested to the Cypriot authorities over their treatment by the dozens of retail brokers based on the island, and say the regulator has failed to act against firms who have unfairly retained client funds.
Kalogerou also said that “firms offering complex or speculative products must limit available leverage to 1:50 as default and process same-day requests for client fund withdrawals.” (Reporting by Huw Jones and Patrick Graham, editing by Nigel Stephenson)