Spreadbetters wary of fresh clampdowns from watchdogs

Hayley Kirton
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IG's boss is unimpressed with how little lead-up the FCA announcement had (Source: Getty)

Spreadbetters are likely to be watching their backs this week, as financial watchdogs crack down on their market.

The UK's Financial Conduct Authority (FCA) last Tuesday revealed it was planning to impose stricter rules on contract for difference (CFD) products, saying it was concerned customers did not fully understand the risks involved.

German regulator Bafin followed suit on Thursday, unveiling proposals to prevent marketing, distribution and sales of CFDs to retail clients who are losing more than the value of their account.

Read more: Trading platforms must bet on a stable outcome

Now, the Sunday Times has reported other European watchdogs could be about to publish similar proposals of their own.

The announcements from the UK and German regulators sent share prices in spreadbetting firms tumbling. On Friday, shares in IG Group closed over 40 per cent lower than they opened on Monday, shares in CMC Markets around 45 per cent lower and shares in Plus500 over 25 per cent lower.

The FCA's announcement came with little warning and IG Group chief executive Peter Hetherington has now slammed the way it was carried out.

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

"It would have been perfectly possible for them to say a couple of months ago, 'We're doing an in-depth review; we're planning on publishing our results in the beginning of December – watch this space'," Hetherington told The Sunday Telegraph.

In a statement issued shortly after the FCA announcement, IG noted it supported "robust and proportionate regulatory oversight", but was wary there were "shortcomings in the approach to the marketing of CFDs and binaries by certain firms, often operating from outside the UK".

In similar statements, CMC said it "recognises that in its consultation paper the FCA is endeavouring to ensure that any regulation is delivered in a balanced fashion and looks forward to working closely with the FCA over the coming months", while Plus500 stressed it "believes that the topics covered in the note will have a material operational and financial impact on the UK regulated subsidiary".

The FCA expressed concerns that 82 per cent of clients were losing money on CFD products.

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