Laws Related to Trading Forex in France
The Autorité des marchés financiers (AMF
) is obligated with regulating forex trading in France. This local regulator oversees and gives authorization to brokers interested in facilitating the trading of currencies on French soil. It was established as a result of the provisions by the Financial Security Act of 2003.
In France, all brokerage firms are required to offer stop losses for their clients. Therefore, before a trader opens a position, they must enter a stop loss preventing a client from making big losses. There is also the negative balance protection where a broker can’t let his client lose more than the balance left on their trading account.
As you can see most of these regulations are aimed at protecting forex traders from losing money. Kindly note that some of these laws are limited to some extent. For instance, negative balance protection doesn’t apply to professional trading accounts.
Recently in 2019, the restrictions on buying contracts for differences (CFDs) were enforced. This was as a result of the efforts by the European Securities and Markets Authority (ESMA), which applied to the distribution, sale, and advertising of CFDs.
How the AMF Regulates Trading in France
It is important to know that in France, the maximum leverage for foreign exchange CFD ought not to be more than 30:1 for major pairs and 20:1 for minor ones. The AMF also requires that brokerage firms be open and honest about the percentage of money clients may lose to leveraged derivatives.
In France, the AMF gives brokers freedom to close down their client’s open position when their account balance drops below half of the stipulated margin threshold.
Did you know that any broker who violates the AMF regulations is blacklisted and denied authority to offer forex trading in France? Additionally, their websites are blocked so that anyone in France can’t have access to them. This is the same punishment that awaits any broker who illicitly offers trading with binary options. From 2015 to 2018, the AMF closed more than 130 foreign exchange websites offering binary options.
The AMF is also tasked with licensing local and international brokerage firms to operate legally. This local regulator also supervises brokerage firms on behalf of the EU not to offer incentives or welcome bonuses to their clients.