CMC Markets News Launches its New CFD Limited-Risk Account

CMC Markets has introduced a new Contract for Difference (CFD) product in France, in part, to meet new regulations as part of the landmark Sapin 2 Anti-Corruption Law.

CMC Markets launched its “limited-risk CFD account in France” earlier this week,according to a press release from the company.

Guilhem Tranchant, Head of CMC Markets France, commented: “This new account follows the enforcement of the Law Sapin 2, but above all respects our clients’ best interests, which is always a key priority.”

The Sapin 2 law made international headlines when it was passed in France in late 2016.

Designed to be a sweeping law to tackle corruption, the law expanded the powers of the French securities regulator, Autorité des marchés financiers, and banned the advertisement on the internet of most binary options and CFD’s.

A CFD is a contract which pays the difference between current value of an asset and its value at contract time; unlike options and futures no commodity or stock is delivered.

A binary option allows an investor to bet whether or not an underlying asset will be higher or lower than a strike price at a certain time.

The ban on advertising of certain CFD’s and binary options appears to be specifically the catalyst for the move. Here’s part of the relevant text of banned products from Sapin 2.

The maximum risk amount is unknown at the time of subscription

The risk of loss exceeds the initially subscribed amount

The risk of loss is not easily understandable due to the nature of the financial contract

The new CMC Market CFD product allows every new client opening a trading account with CMC Markets to limit their potential loss to the initial investment made, thereby satisfying all three stipulations which would trigger a ban on advertising.

CMC Markets has created a protected account where losses are restricted to the initial investment (excluding trading costs)” a press release stated explaining how the product would work, “for every new position taken on the markets.

“In order to facilitate this, a guaranteed stop-loss order (GSLO) will automatically be linked to every new trade placed. This means that the maximum risk for every position will be limited to the initial investment (the required margin), excluding trading costs. Clients pay a premium for GSLOs and this cost is the same on a limited-risk account as it is on a standard account.”

This is the second time in six months that CMC Markets News has introduced a CFD product in Europe.

In October, the company introduced its “Knockout CFD” in Germany and Austria.