The Securities Commission of The Bahamas has announced sweeping changes to its attractive regulatory regime for Forex and Contracts for Difference (CFD) brokers. According to our colleagues at Finance Magnates, the regulator is poised to limit available leverage for retail trading to 200:1 and create a category of traders similar to other efforts in Europe, known as professional traders.
Furthermore, the regulator has indicated it will ban binary options businesses, but such bans are already in place around the world and, frankly, the Bahamas is late to the party. In addition the SC of the Bahamas announced marketing restrictions, which will limit cold calling and other aggressive marketing tactics. Brokers will also need to ensure that customers’ “stop out” levels do not exceed 50% of net equity in the account.
Along with this the regulator says that negative balance protections will need to be put in place and CFD businesses will be required to register the person responsible for the supervision of the company, who will ensure the company remains in compliance with the law. The regulator also plans to institute reporting requirements for CFD transactions and standardize such materials as risk warnings.
While the efforts put forth by the Securities Commission of The Bahamas look to be sweeping changes in the right direction – the fact that other jurisdictions have implemented the same or similar rules over the past few years shows that the Caribbean islands are lagging behind their major international counterparts. While the Bahamas was so far attractive to offshore firms looking to operate with minimal oversight, it will now arguably become another country looking to catch up to its peers, but lacking in a competitive advantage for new business from broker firms.