CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data. *Availability subject to regulation.
BaFin is the primary institution in Germany responsible for the supervision of financial services, such as securities trading.
BaFin operates autonomously, on a set of by-laws that govern its organisation, structure, rights, and obligations. It also strictly adheres to its mission statement, which states that BaFin’s function is to limit risks to the German financial system at both the national and international level and to ensure that Germany as a financial centre continues to function properly and that its integrity is preserved.”
The Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht – or BaFin as it is better known), was founded on 1st May, 2002 when the Federal Banking Supervisory office merged with the Federal Insurance Supervisory Office and the Federal Securities Supervisory Office.
The passing of the Financial Services and Integration Act (Gesetz über die integrierte Finanzaufsicht, or FinDAG) became the basis for the foundation of BaFin. The purpose of this legislation was to form a single, central financial regulator that could oversee all financial markets and institutions. The formation of BaFin ensured all-encompassing supervision of financial service providers, credit institutions, banks, stock exchanges, insurance companies, and brokers. This model was designed to provide greater transparency and manageability, as well as to ensure that all financial activities were regulated.
From November 2014, a Single Supervisory Mechanism (SSM) was put in place to supervise significant institutions throughout the Eurozone. This means that for the German institutions that fall within the criteria for supervision from the SSM, BaFin has been working closely with the European Central Bank (ECB) to carry out its supervisory functions.
BaFin plays a vital role in maintaining an environment of trust between financial institutions and their customers. It operates in the public interest, with its primary motive being the proper integrity, functioning, and stability of the financial system in Germany. The following objectives and responsibilities are defined in the regulator’s mission statement:
A focus on systemic importance and risk
A distinctly European and international identity
Collective consumer protection
provision of specialist advice to national, European and international decision-makers
Clarity and transparency
Through the mission statement, BaFin strives to establish Germany as a stable financial centre on a global level and to solidify consumer protection through regulations.
BaFin are responsible for ensuring that providers are acting in the best interests of their clients and that they remain solvent. This, in turn, helps them to carry out their duties towards clients and consumers, ensuring their confidence in providers of financial services, as well as in the financial markets and the companies operating them.
BaFin is responsible for the supervision of all financial institutions operating in Germany, including Forex/CFD (contracts for difference) brokers. In order to offer their services in Germany, brokers need to obtain authorisation from BaFin.
BaFin has significant concerns regarding CFDs with an additional payments obligation and issued a General Administrative Act restricting the marketing and distribution of such products.
A unique characteristic of BaFin as a financial regulatory body is that it offers assistance with customer complaints against financial service providers. The majority of prominent European regulators, including the CySEC in Cyprus and the FCA in the UK, do not offer such assistance.
BaFin have one of the most stringent regulatory policies in the EU. To qualify for authorisation by BaFin, brokers are required to meet the highest standards. All brokers are directly supervised by BaFin and are required to adhere to the guidelines that form a part of the German Securities Trading Act. Since the central powers for regulation have been vested in BaFin, it has been remarkably successful in reducing financial fraud, which in turn has led to a growth in the trust and confidence in financial markets from consumers.
BaFin’s strict regulation rules require a broker to have a minimum capital of €750,000, solid credit worthiness, periodic audits, and financial statements to monitor their conduct.
Popular online brokers, XTB, are authorised and supervised by BaFin. IG Markets also provide their services in Germany with aspects of their provision governed by the German regulator, making them suitable for traders from Germany.
Overall, BaFin has been remarkably successful in its aim to make Germany a stable financial market. Since its formation in 2001, it has grown its sphere of operations and as of now, it is responsible for the supervision of all financial institutions in Germany.
Due to the central nature of power and the customer-oriented approach of BaFin, it has dramatically improved the consumers’ confidence in the financial markets.