Why is CFD not allowed in US?

OTC products, by their very nature, bypass the rigorous regulatory frameworks imposed on traditional exchanges. This lack of oversight can lead to heightened risks for investors, as there are fewer safeguards in place to protect their interests.

The decision to ban certain financial instruments, such as Contracts for Difference (CFDs), is rooted in valid concerns regarding transparency and associated risks. The primary impetus behind this ban stems from the opaque nature of CFDs, which operate as over-the-counter (OTC) products.

Another significant concern is the potential for Leveraged trading within CFDs. Leverage, while offering the possibility of magnified profits, also significantly increases the risk of loss. For inexperienced or unsuspecting investors, the use of leverage can result in devastating financial consequences.

In light of these risks, regulatory authorities have deemed it necessary to impose restrictions on CFDs and similar products. By doing so, they aim to protect investors from the potential pitfalls of trading in unregulated and highly leveraged markets.

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