Trading platforms are two a penny. Providers undercut each other on conditions and outbid each other with their promises of quick profits.
Do you understand what happens with CFDs and Forex trading?
Platforms advertise about trading currencies, commodities, shares, crypto assets and gold. In reality, however, you usually do not physically purchase currencies, commodities, shares, etc., but are only betting on rising or falling prices. This constellation often centres around Contracts for Difference (CFDs). In addition, these highly speculative derivatives are often “leveraged”, and are only suitable for very experienced investors. The FMA has therefore severely restricted their distribution. CFDs are totally unsuitable for long-term investing of assets. Consumers frequently underestimate the high risk of loss! Never buy any financial product that you do not understand!
Attention! There are a lot of scammers about!
Reputable brokers or trading platforms are authorised by a European financial market supervisory authority. Check that your chosen platform has a licence granted by an EU supervisory authority! Supervised platforms are required to set up complaints management systems and must be easily accessible. Before using a platform, in any case consider whether there might be a language barrier for you.
If you choose a platform outside the EU on your own initiative, it will not be supervised and you will not enjoy the special consumer protection provided by supervisory law.
How do dubious providers operate?
Dubious platforms often look professional. To start off, they will only ask for small amounts, and then they quickly display supposedly high profits. Suddenly, however, contact is lost with the provider: first you are given reassurance, soon you are no longer able to reach anyone, and your money is lost. At this stage you have to be especially careful! Often, a short while later, other platforms, fictitious lawyers, even alleged supervisory authorities will contact you, offering to assist you in recovering your money. This is a common follow-up scam to take money from you again – don’t fall for it! Whatever you do, don’t transfer more money!
If you have invested and suspect fraud – contact the police as soon as possible! Unfortunately, the chances of getting your money back are almost always negligible.
Tell-tale warning signs include:
- unsolicited phone calls
- advertising featuring celebrities and TV shows
- promises of high returns, but with very general risk warnings tucked away in a footnote
- initially small deposits, that grow rapidly after a very short time
- no information about the company’s registered office, charges, supervisor
- non-EU supervisory authorities are unable to grant authorisations to operate in Austria!
Crypto exchangesdiffer from trading platforms in that they do not only speculate on price differences, but actually offer other crypto-assets. Crypto exchanges are required to be registered with the FMA as virtual assets service providers. Trading platforms offering crypto-CFDs or crypto-futures, are required to be banks or investment service providers.
15 Fixed or variable interest rates on borrowing?
You can find entities that are allowed to provide such financial services in the FMA’s Company Database.
Read more in the FMA Focus on Product Intervention.
The Chamber of Labour (Arbeiterkammer) has issued a study in which it examines a few platform providers in particular detail.