CFDs gain reprieve from CVA threat
Earlier this year, a number of retail FX brokers were lining up to prophesy doom for the contracts-for-difference (CFD) market. Basel III had placed the instrument square in the sights of the credit valuation adjustment (CVA) charge, a new rule requiring an extra wedge of capital to be added to derivatives providers’ balance sheets. Retail FX brokers would be forced to scale down provision of CFDs, or forced out of the market entirely due to this higher capital cost, they claimed.
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