BaFin — Bundesanstalt fuer Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority)
German integrated supervisor since 2002; banned additional payment obligations on CFDs
- Max retail leverage
- 1:30
- Compensation limit
- 90 percent of the claim, capped at EUR 20,000 per investor
- Negative balance protection
- Required
About the BaFin
The Federal Financial Supervisory Authority was formed in 2002 by merging the separate German supervisors for banking, insurance and securities trading into one body. It authorises and supervises investment firms offering CFDs and forex to German clients, working within the EU framework and, for significant banks, alongside the European Central Bank. German authorisation brings MiFID capital requirements, governance and outsourcing standards, transaction reporting and annual audit of both financial statements and the securities-services obligations, including how client money is safeguarded.
BaFin has a track record of moving before the rest of Europe on retail CFD risk. In 2017 it used national product intervention powers to prohibit the marketing, distribution and sale of CFDs that carried an obligation to make additional payments, effectively mandating negative balance protection for German retail clients a year before the ESMA measures. Germany now applies the EU-derived caps of 1:30 on major currency pairs with lower tiers for other asset classes, the 50 percent margin close-out rule, standardised risk warnings and the prohibition on inducements to retail clients.
Compensation runs through the Entschaedigungseinrichtung der Wertpapierhandelsunternehmen, the statutory compensation scheme for securities trading firms. It covers 90 percent of a client's claim up to a maximum of EUR 20,000 per investor, which sits well below the UK figure and leaves a deliberate element of co-insurance. Client money must be held in trust or segregated accounts at credit institutions, and the safeguarding arrangements are audited. Disputes go to the firm first, then to a recognised financial services arbitration board or the civil courts; BaFin reviews conduct complaints but does not award compensation to individuals.
Why we rate it tier 1
BaFin acted ahead of the EU in banning additional payment obligations on retail CFDs, applies full MiFID conduct and client asset rules with rigorous audit, and backs them with the EdW compensation scheme, though at a modest EUR 20,000 ceiling.
High minimum capital, enforced conduct rules, a public register that is genuinely policed, and an independent complaints or compensation route that pays out when a firm fails. These are the licences worth paying a wider spread for.
BaFin protections at a glance
| Full name | Bundesanstalt fuer Finanzdienstleistungsaufsicht (Federal Financial Supervisory Authority) |
|---|---|
| Jurisdiction | Germany |
| Region | Europe |
| Established | 2002 |
| Maximum retail leverage | 1:30 |
| Leverage regime | Germany applies the EU product intervention measures, capping retail CFD leverage at 1:30 on major currency pairs. BaFin went further earlier, requiring negative balance protection from 2017 and banning CFDs with additional payment obligations. |
| Investor compensation scheme | Entschaedigungseinrichtung der Wertpapierhandelsunternehmen (EdW) |
| Compensation limit | 90 percent of the claim, capped at EUR 20,000 per investor |
| Negative balance protection | Required — BaFin banned CFDs carrying an obligation to make additional payments in 2017, making negative balance protection compulsory for German retail clients before the EU-wide rule arrived. |
| Client-fund segregation | Investment firms must hold client money in trust or segregated accounts with credit institutions under the German implementation of MiFID client asset rules, with independent audit of the safeguarding arrangements. |
| Complaints route | Complain to the firm, then use a recognised consumer arbitration board for financial services or submit a complaint to BaFin, which reviews conduct but does not award damages. Civil courts remain available. |
| Public register | BaFin Company Database (portal.mvp.bafin.de/database/InstInfo) |
What to check on the BaFin Company Database
- 1Search the firm in the BaFin company database at portal.mvp.bafin.de and note its identification number.
- 2Confirm the authorisation covers investment services such as dealing on own account or contract broking.
- 3Check whether the entity is German authorised or an EEA firm passporting in, since the compensation scheme differs.
- 4Verify the legal name and address match the entity on your client agreement.
- 5Check BaFin consumer warnings and unauthorised business notices for the firm name or brand.
Register: portal.mvp.bafin.de/database/InstInfo. Always navigate to the register from the regulator's own domain rather than a link supplied by the broker.
Brokers on PipDig regulated by the BaFin
None of the brokers currently reviewed on PipDig hold a BaFin licence. That is not a mark against the authority — our review coverage follows where readers actually open accounts, and it changes as we test more firms.
BaFin FAQ
What does the EdW compensation scheme pay?
The Entschaedigungseinrichtung der Wertpapierhandelsunternehmen covers 90 percent of a client's claim against a failed German securities trading firm, capped at EUR 20,000 per investor. The 10 percent co-insurance element is deliberate. It applies to the firm's failure to return client money or instruments, not to losses you make trading.
Why did Germany ban CFDs with additional payment obligations?
In 2017 BaFin used national product intervention powers after retail clients were left owing money to brokers following sharp market gaps. The measure prohibits marketing, distributing or selling CFDs to retail clients where they could be required to make further payments, which in practice mandates negative balance protection. It preceded the equivalent EU-wide rule.
Does BaFin cover an EU broker passporting into Germany?
Only partly. A firm authorised elsewhere in the European Economic Area can serve German clients under its home-state passport. Its prudential supervision and compensation scheme remain those of the home state, so a Cypriot firm would use the Cyprus Investor Compensation Fund, not the EdW. Check which regulator authorised the entity you are contracting with.