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.
CySEC is there to protect all market players but emphasis is placed on consumer protection. Protection of consumers of financial products (including traders who trade forex and other financial market products) is carried out at three intervention points:
The Cyprus Securities and Exchange Commission was formed in 2001 as a regulator of the financial markets and market participants in Cyprus. When Cyprus joined the European Union in 2004, CySEC was mandated to conform with the MiFID protocol as an EU-member state. MiFID gave regulated entities in Cyprus access to other markets all over Europe, thus putting a lot of responsibility on CySEC in ensuring these entities met the required standards.
The Cyprus Securities and Exchange Commission (CySEC) is the agency tasked with the regulation of the financial markets and players in the financial markets in Cyprus. Being a major financial hub which attracts a lot of financial services companies, Cyprus plays a key role in the European financial markets.
Many forex brokers and binary option firms have taken advantage of the low tax and investor-friendly environment that Cyprus presents to open shop in the country. This has put a lot of responsibility on CySEC in terms of controlling the activities of these firms and making sure they operate within the laws and regulations.
CySEC performs several functions in its capacity as a regulator of financial markets and market participants.
An explanation of each of these functions is provided below.
CySEC has rapidly expanded the category of companies that it regulates, especially since the recognition of binary options as a financial instrument worthy of regulation. The following categories of companies are eligible for licensing by CySEC:
By this definition, CySEC provides regulation for brokers and other market operators within the stock market, forex market and binary options market. Due to the influx of many of these companies into Cyprus at the turn of the century to benefit from its tax haven status, CySEC has literally had to undertake licensing of thousands of companies and entities operating in these markets.
CySEC does not just stop at issuing of licenses to these firms. It also carries out continuous supervision, monitoring and evaluation to determine if the companies are operating under the terms by which the licenses have been issued. CySEC has had to revoke licenses of a few companies which broke the rules of operation as CIFs.
CySEC has strict rules for companies operating with its licenses. Some of these rules are as follows:
There are other rules which operators with a CySEC license must fulfil. CySEC regularly monitors these firms as part of its supervisory role in the financial markets.
Where market operators licensed by CySEC run foul of the rules, CySEC takes punitive action against such operators. Many of these sanctions start from issuance of public warnings against certain brokers, financial penalties and in a few cases, outright suspension of licensing.
A criticism of CySEC in this area is that the punishments rendered by CySEC to errant operators are relatively lenient when compared to the punishments that other regulators dish out to operators who do not comply with the rules. For instance, CySEC’s most common mode of punishment is application of financial penalties which are in tens of thousands of Euros, whereas the CFTC which regulates binary options and forex in the US has been known to apply fines in millions of dollars against errant brokers.