BSE, NSE warn against trading in contract for difference

NEW DELHI: National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), both based in Mumbai, on Monday said they have noticed some unregulated platforms and websites offering trading in certain unregulated derivative products called Contracts for Difference (CFD) or Binary Options.

“Investors falling prey to the promises of high/exorbitant returns by these websites/platforms may eventually lose money heavily. Hence, investors are advised to refrain from dealing/investing in unregulated products such as Contracts for Difference (CFDs)/Binary ,” said both exchanges in a release.

CFD basically refers to the trade when you enter into a contract without owning the asset. A CFD broker or trading platform will take position on behalf of a trader, promising to pay the difference of the trade to the traders.

Many traders, attracted by tall promises and high leverages offered by brokers, are lured to these platforms.

The major risk with trading with a CFD broker is they are largely unregulated, and may not be a Sebi registered entity. So, when the company closes its shops, you may lose your money.