Yahoo Finance City watchdog pauses spreadbetting probe as Europe regulator steps in
The City regulator has pressed pause on a major trading crackdown after the European markets watchdog unveiled its own plans to do so.
Spreadbetting firms were expecting the Financial Conduct Authority to announce the results of its consultation into complex derivative products known as contracts for difference (CfD) this month, after the regulator outlined proposals for the sector in December amid concerns ordinary investors were losing money.
However the European Securities and Markets Authority has now weighed in, announcing that it is considering using its "product intervention powers" to introduce new rules in this area from January 2018.
"Some of the measures under discussion at ESMA are broadly similar in nature to those proposed by the FCA," the City regulator said in response, detailing that its own probe would be put on hold so that it can work with the watchdog on potential measures so Europe is in sync.
While the nuts and bolts of the proposals are still being discussed final rules will likely mirror the FCA's suggestions last year aimed at protecting inexperienced traders, such as plans to set lower leverage limits for inexperienced retail clients or force CfD providers to display risk warnings on client accounts.
IG Group, which controls 40pc of the UK's spreadbetting market and saw its shares hammered by news of the crackdown last year, said it "supports FCA's decision to delay, in order to achieve harmonisation across Europe for the regulation of CFDs and ensure that any measures are informed by clear and robust data analysis."
The firm, alongside its rivals CMC Markets and Plus500, brushed off a German clampdown on CfDs in May, arguing that they already comply with the proposals put forward.
CMC boss Peter Cruddas then went on to salute the UK crackdown on trading earlier this month, telling The Telegraph his business was "no churn and burn organisation" and only stands to benefit from tougher regulation. "The worst possible outcome is that they don't implement these changes," he said.
The FCA also said that it had found evidence of CfD providers not checking investor level of experience or giving risk warnings when bringing in new clients.
