Exchanges warn investors against unregulated derivatives products
August 23, 2021
The National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE) issued an advisory warning investors on Monday asking them to stay away from unregulated derivative products traded on over-the-counter platforms.
The exchanges said they had noticed some unregulated platforms and websites offering trading in unregulated derivative products called Contracts for Difference (CFD)/Binary Options.
“Investors falling prey to the promises of exorbitant returns by these websites and platforms may eventually lose money heavily. Investors are advised to refrain from dealing and investing in such unregulated products offered by such unregulated internet-based trading platforms,” the exchanges said in a note on Monday.
These platforms allow trading in currencies, international stock indices, and commodities, but the orders are not routed through the exchanges.
When you buy a CFD, you don’t actually own the underlying, but you have a contract with the platform that will give you a payout based on the price change of the underlying. So, the trading costs in terms of taxes and exchange fees is almost nil.
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