How prohibition of FX Bonuses will affect the industry?
Will the prohibition of Forex Promotions in Europe affect you? Ups and downs of the new European move in the financial industry.
New bonus practices are announced by the supranational regulator of Europe. The use of all of the Forex promotions will be suspended. The suspension applies to all the risky and suspicious promotions that encourage the clients to trade more or take bigger risks.
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Bonuses are one of the effective marketing tools used by forex brokers. The amount and conditions can be different and they depend on the broker who use this kind of ‘reward’. The bonuses are typically given to new traders who have opened an account with a brokerage.
The European Securities Markets Authority states that high usage of bonuses may cause an impact on client’s trading behavior. The suspension applies to all the promotions that encourage the clients to trade more or take bigger risks, which leads them to lose the account principal.
According to the new rules, the national regulators will be obliged to abide the rules and the implementation of the European MiFIL law will be monitored.
Who will be affected by the new laws? Mainly the binary options brokerages, as the binary options industry relies on bonuses. Supplying the clients with bonuses is a key for the binary options brokerages’ actions, as the clients are often required to first make moves with the bonus amount if they would like to withdraw it.
Companies, which are offering the impossible amounts of money as bonuses, are perceived as the ones that care more about their own interests, instead of the clients’. It is also a standard practice that the clients are requested to keep the bonus in a separate balance, which is not connected with the real account of the client. It is not unusual, that the requirements are not mentioned to the traders when they are signing up for accounts and accepting the bonuses.
Forex promotions have been a controversial subject, mostly because of what follows them. The European regulators claim that the prohibition on the latest Forex bonus offers and deals is made to protect the clients and investors from the unclear brokers’ operations. The new restricted rules introduced by European regulators have already had their results – plenty of companies are out of business or their profits are remarkably lower.
On the other hand…
…such decisions can have a huge impact on the whole Forex and trading industry.
Let’s take a look at this example. The French regulator has declared a ban on all online advertisement of Forex and binary option products. The full list of risky and speculative products was published in the end of September. It includes binary options contracts and offerings that are in any way related to Forex (with the leverage bigger than 1:20). The decision of the Autorité des Marchés Financiers can make the situation of the French brokerages rather complicated, causing many firms to pull out of the market. The government in France is planning on making new regulations, which will ban the electronic advertising (including email campaigns, radio, television, etc.).
French regulations will impact plenty of trading investors to change their actions and back out of the market. If this would follow in other European countries, the results would be visible in the whole financial industry.
How will that affect the future of latest Forex bonus offers and deals?
New laws and regulations make the future of latest Forex bonus offers and deals unsure. Financial regulators of many West European countries (such as Germany, Denmark or the Netherlands) have tightened their rules of the trading industry. The French financial regulator has already announced the limitation of advertisement of risky and speculative contracts. As long as the brokers follow the rules and put their requirements clear for the clients, it is unlikely that the forex bonuses will be banned entirely. That move would radically change the trading market and the strategy of Forex firms.