FCA has confirmed the restrictions it is putting in place for firms that offer CFDs to retail customers. It is requiring all firms that offer CFDs and CFD-like options to retail consumers to:
- limit leverage – depending on the underlying asset to between 30:1 and 2:1;
- close out a customer’s position if funds fall to 50% of the margin needed to maintain open positions;
- guarantee a client cannot lose more than the total funds in their trading account;
- not offer inducements to retail consumers to encourage trade; and
- give a specific risk warning that discloses the percentage of the firm’s retail client accounts that make losses.
The new rules apply from 1 August for CFDs and 1 September for CFD-like options. FCA has also warned it will carry out specific supervisory work to ensure firms comply with the new rules, including checking whether firms are inappropriately opting clients up, moving clients to overseas entities or failing to comply with financial promotion restrictions.