Spreadbetting firms have been given a bloody nose by one of Britain's largest trading platforms, which has broken ranks and put weight behind a clampdown on the sector by the UK’s financial regulator.
Saxo Bank today announced it has withdrawn from the UK CFD and FX association, saying it “strongly supports” proposals by the Financial Conduct Authority (FCA).
Similar to its continental European counterparts, the FCA is planning to curb the level of risk new customers expose themselves to by placing a cap on leverage multiples. It also wants to stop spreadbetting firms providing large inducements to entice investors.
Regulators have been flooded with responses to the proposals with their final decision expected in August. The UK CFD and FX association has drawn up a code of conduct in an attempt to mitigate the need for more stringent elements of FCA plans being implemented.
Saxo Bank founder and chief executive Kim Fournais said the firm’s departure from the trade body was “because the association was not sufficiently reflecting our views and interests”.
It is understood the UK CFD and FX association wants the FCA to increase a proposed leverage cap from 50 times to 100 times.
The Saxo Bank group takes a prudent approach to leverage and welcomes the proposals from the FCA to set responsible boundaries on leverage.
"Clients need protection"
The difference of opinion leaves the seven members of the UK CFD and FX association, which includes the UK’s largest listed firms IG and CMC.
But speaking to City A.M. earlier this month, CMC boss Peter Cruddas also welcomed the FCA proposals.
“We totally agree with what the regulator is trying to do. Inexperienced clients need protection,” he said.
“We think it will be good for us in the long run and good for the industry, provided it’s implemented across the whole of Europe, including places like Cyprus.
“The smaller firms will not survive. So bring it on.”
Who is left in the UK CFD and FX association?