Regulating Speculative Gambling Over Investment: BaFin Pushes for Stricter Oversight of High-Risk Turbo Certificates Trading
In a bid to protect investors from unnecessary risks, the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) has proposed measures to limit speculation with Turbo certificates on the stock market. These leveraged products, often considered high-risk, have been a subject of concern due to their association with gambling.
Historically, investing in the broader market over long periods has produced stable returns. However, trying to find particularly profitable stocks through targeted holding and selling increases risk. Turbo-Zertifikaten, on the other hand, are bets on rising or falling prices entered into by two trading partners.
The Austrian startup magazine Trending Topics has been campaigning for high-risk investments in startups as a better alternative to gambling. Yet, the statistics paint a different picture. According to BaFin's investigation, the majority of retail investors are making losses with Turbo-Zertifikaten. Around 74% of investors have lost an average of over 6,000 euros in the last five years when trading these products. The total loss across all investors amounts to around 3.4 billion euros.
To combat this, BaFin plans to significantly restrict the trading of Turbo-Zertifikaten. Anyone who wants to trade these products must pass a knowledge test that shows an understanding of the product's basic functions, which will need to be repeated every six months. Providers of Turbo-Zertifikaten will also be required to clearly indicate that around 70% of retail investors suffer losses with these products in any form of advertising or sales.
Bonuses or benefits that could motivate the purchase of Turbo-Zertifikaten, such as reduced order fees, gifts, or preferential service, will be banned in the future. These measures aim to prevent dangerous gambling with certificates, without hindering experienced investors.
Comments in the Finanzen discussion and the Reddit channel r/Finanzen compare Turbo-Zertifikaten to gambling. A comment by u/the-eyes-never-lie encapsulates this sentiment, stating, "Turbo-Zertifikaten are closer to gambling than long-term wealth accumulation." Even experts from Switzerland share this view, with BaFin executive director Thorsten Poetzsch echoing this sentiment.
The broker who sells the Turbo-Zertifikaten earns money with every deal, similar to a bank in a casino. This, coupled with the high-risk nature of these products, has led to concerns about investor protection.
Investing in broad-based ETFs like the MSCI World or the FTSE All-World spreads the risk of individual value failure across thousands of companies worldwide. This approach, while not as exciting as betting on individual stocks, offers a more stable and secure path to potential returns.
For those interested in high-risk investments, it is crucial to understand the risks involved. Understanding how financial products work on the stock exchange could serve as a good barrier to entry, preventing investors from exposing their money to higher risks than they can handle. It's always better to be informed and make calculated decisions than to gamble with one's financial future.
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