AMF warns of the dangers of forex market trading for individual investors 

The AMF, France’s financial markets regulator, has begun an online publicity campaign to increase public awareness of the risks of trading in the forex market, following the growing number of complaints from investors and many advertisements for investors to trade in the online foreign exchange (forex or FX) market.

For the study, AMF questioned authorised participants making up a very significant of the CFD and forex market in France. It is the first reliable evaluation of the returns of individuals investing in forex and/or CFDs.

Lessons drawn from the study confirm the danger of investing in this market for the public. In four years, the percent of clients losing money for all providers combined is nearly 89%, while the average loss per client was nearly €10,900 between 2009 and 2012. Over the four years, 13,224 clients together lost nearly €175 million, while the remaining 1,575 clients earned a total of €13.8 million.

In addition to the great majority of losing clients and the losses suffered, the study shed light on a behavioural phenomenon: individual investors learn little over time. Indeed, it appears that the most active and regular investors see their losses mount over time.

“Our study demonstrates that even with duly authorised intermediaries, the majority of individual investors lose money, sometimes more than their initial investment because of the financial instruments that are available,” explains Benoît de Juvigny, AMF Secretary General.

While online trading in the foreign currency market with regulated operators leads to losses for the majority of clients, individual investors must also be wary of the efforts of fraudsters in the market. Numerous firms operate in France without the authorisations required to offer services to the public. The AMF receives many complaints from individual investors seduced by enticing promises in numerous Internet advertisements. The serious façades of some websites may actually be hiding frauds. Using impressive marketing, these firms steal the money of clients who find they have limited or no recourse due to the location of fraudsters, who are usually abroad.

The AMF has taken legal action to block access for Internet users in France to certain sites offering services without proper authorisation. On 15 September 2014, the Court of First Instance of Paris agreed to this request for the first time.

“We laud this decision, which constitutes a new measure initiated by AMF in our battle against this phenomenon. However, beyond this legal step, we are convinced that the best weapon remains prevention,” explains Natalie Lemaire of the AMF’s Retail Investor Relations Directorate. “Foreign exchange trading is a market that individual investors should avoid. This is our conviction and the purpose of our efforts today.”

 

Source: AMF-  AMF warns of the dangers of forex market trading for individual investors

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