How Chilean Brokers Are Getting Rich Selling Derivatives Banned in the U.S.

by Eduardo Thomson,  Bloomberg

It’s noon inside the offices of ForexChile in Santiago, and dozens of salespeople are working the phones, talking up investments linked to everything from Facebook stock to copper futures. They hold out tantalizing prospects to those on the other end of the line: potential returns of 20 percent, 30 percent, even 40 percent.

Familiar, yes — and illegal if this were the U.S. Because what these people are selling are neither stocks nor bonds nor futures nor funds. They are offering contracts for difference, financial derivatives that are off-limits to retail investors in the U.S. and highly regulated elsewhere.

The scene unfolds daily inside one of the most fashionable business addresses in Chile, where the contracts are perfectly legal and trading in them has exploded. BEFX, another brokerage that sells them, estimates that as much as $14 billion in leveraged trades are made every month. That’s about six times the turnover in the nation’s stocks.  Read the entire story.

 

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