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With an objective to protect investors interest, leading stock exchanges BSE and National Stock Exchange on Monday said that they have noticed some unregulated platforms and websites offering trade in certain unregulated derivative products called Contracts for Difference (CFD) or Binary Options.
In a note, exchanges said that investors falling prey to the promises of high or exorbitant returns by these websites or platforms may eventually lose money heavily.
“Investors are advised to refrain from dealing or investing in unregulated products such as contracts for difference (CFDs) or binary options offered by such unregulated internet-based trading platforms,” exchanges said.
According to Investopedia, a contract for difference is a contract between a buyer and a seller that stipulates that the buyer must pay the seller the difference between the current value of an asset and its value at contract time.
CFDs allow traders and investors an opportunity to profit from price movement without owning the underlying assets. The value of a CFD contract does not consider the asset’s underlying value: only the price change between the trade entry and exit.