Spreadbetters hit again as German regulator announces a clampdown

Hayley Kirton
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Another day, another new set of rules for spreadbetters (Source: Getty)

Times got tougher for spreadbetters today as the German regulator revealed plans for more red tape for the market.

Bafin's announcement that it is preparing to apply more rules to the market for contracts for difference (CFDs) comes just two days after the Financial Conduct Authority (FCA) unveiled similar plans.

In particular, Bafin is concerned price fluctuations might be happening at such a sudden pace that investors have no chance to review their position and limit their losses. In some cases, customers will need to stump up extra cash if their losses exceed the capital they have put down.

With that in mind, Bafin is considering banning marketing, distribution and sales of CFDs to retail clients if they are losing more than the value of their account and is running a consultation on the matter until 20 January.

Read more: FCA gets tough on spreadbetters: But what is a contract for difference?

"In the case of CFDs with an additional payments obligation, the risk of loss for the investor is incalculable," said chief executive director, Elisabeth Roegele. "For consumer protection reasons, we cannot accept that."

Shares in IG Group closed down 4.9 per cent at 487.85p, shares in CMC Markets closed down 0.8 per cent at 115.62p and shares in Plus500 closed down 1.3 per cent at 372.19p.

Responding to Bafin's statement, IG noted it seemed "consistent" with new rules the company had already recently introduced for itself.

Read more: No-go zone: Is political risk making Europe too hot for investors?

"IG firmly believes in robust and proportionate regulatory oversight of the CFD sector in all the markets in which it operates," the statement continued. "The company has operated and will continue to operate to the highest standards in the industry."

The FCA revealed on Tuesday it was concerned about the high proportion of customers who were losing money on spreadbetting products and was worried retail clients did not fully understand the risks involved, adding it would be imposing stricter rules as a result.

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