Monday 1 July 2019 3:48 pm

Regulator makes CFD restrictions permanent

The City watchdog has confirmed that it will make a crackdown on selling contracts for difference (CFDs) to retail clients permanent. 

The Financial Conduct Authority (FCA) said it will make the European Securities and Market Authority’s (ESMA) temporary restrictions on CFDs permanent following evidence that the high-risk products had been “aggressively marketed” to the public.

Read more: How the new CFD measures will affect traders

Under the rules, which also include “CFD-like” products, firms will be banned from offering money and other inducements to encourage trading.

Protections will also have to be provided to guarantee that a client cannot lose more money than the total funds in their CFD account. 

The restrictions, which will come into force on 1 August for CFDs and 1 September for CFD-like options, also mean firms will be required to close out a customer’s position when their funds fall to 50 per cent of the margin needed to maintain their open position.

Christopher Woolard, FCA executive director of strategy and competition, said: “Our intervention follows evidence of firms aggressively marketing CFDs to the general public, meaning retail consumers are buying a product that isn’t appropriate for them.

Read more: Watchdog’s crackdown on CFDs may harm not help the markets

“We saw firms offering CFDs with increasingly higher leverage, resulting in high proportions of consumers losing money.

“EU rules are temporary. The new rules maintain and strengthen protections for customers.”