Find out about our expectations of providers and brokers offering retail consumers contract for differences (CFD) products, which include spread betting and rolling spot foreign exchange (FX).
On this page
CFDs are high-risk products, which are not suitable for all retail consumers. We expect firms to comply with our rules to ensure that these products are marketed and sold appropriately to the right consumers.
Consumers who are being encouraged to ‘opt up’ as professional should be aware that they will lose some of the protection that retail customers otherwise receive.
On this page, find out about:
- Our March 2023 Portfolio letter on implementation of the Consumer Duty
- Our 2022 Dear Portfolio letter setting out our priority areas of focus for this sector
- Key investor information including consumer warnings on poor behaviours by some firms and introducers operating in this sector
- Significant past communications to the CFD portfolio:
Our March 2023 Consumer Duty Letter
On 31 March 2023, we published a Dear Portfolio Letter to help firms implement and embed the Consumer Duty effectively. This included our expectations of how firms should embed the Duty, examples of good and poor practice, reminders of the implementation timelines, guidance on how the duty applies to firms in the portfolio, our supervisory approach and next steps, and key things for firms to consider.
- Dealing with problem firms – A significant minority of CFD firms have caused material consumer harm/ losses. We have already taken intervention action in 2020 and 2021 to mitigate this risk, which we estimate has prevented ongoing consumer harm of around £100mn a year, and remain vigilant to spot and deal with problem firms who:
- engage in scam/churn activities;
- circumvent our rules by inappropriately ‘opting-up’ retail consumers to ‘elective professional’ status or who redirect them to associated CFD providers incorporated overseas, both of which can deprive consumers of protection under our rules; and/ or
- use and pay unauthorised affiliates (eg social medial ‘influencers’) to introduce clients.
- Putting customers’ needs first – We are focused on the conflicts of interest inherent in the CFD providers’ business models and how this interacts with the new Consumer Duty which comes into force on 31 July 2023. Conflicts arise because firms profit excessively when customers can be persuaded to trade more frequently and/or in larger volumes than is in their best interests. Our current focus builds on the issues we raised in our 2016 and 2018 Dear CEO Letters.
- Delivering assertive action on market abuse – CFD providers can be used as conduits of financial crime, primarily insider dealing. We have previously engaged with firms on this but remain concerned at the level of suspicious transaction activity and the weakness of some firms’ controls.
- Reducing harm from firm failure – our focus here is to avoid disorderly firm failure causing consumer harm. We continue to focus on:
- Financial resilience, including implementation of the Investment Firms Prudential Regime
- Protection of client money and assets; and
- Operational Resilience, given CFD firms’ dependence on stable and resilient IT platforms.
Prior to investing in CFDs, you should check the firm’s regulatory status and carefully consider the high risks associated with trading these products, especially if you have been actively contacted by a firm or its introducers.
You should check:
- You fully understand the protections FCA rules provide retail consumers you would lose if you chose to ‘opt up’ to professional client status (see July 2019 Press Release mentioned below for details);
- Our Unauthorised firms and individuals web page, where you can search for names on our Warning List.
- the Financial Services Register, where you can check whether a firm is FCA-authorised. (Please note that all firms on our Register with the status ‘Applied to cancel’ and EEA firms in ‘Supervised run-off’ should not be taking on new UK clients.)
You should be alert to the possibility of overseas firms using very similar names to UK firms on our register and/or sharing common trading names. You should check a firm's Terms & Conditions to establish the actual entity you will be contracting with and where it is incorporated. You should carefully consider the protections you may lose when dealing with an overseas firm.
Even if you will be/are dealing with an FCA-authorised firm, you should still be alert to additional risks with some firms. If you have any uncertainty, we recommend you review:
- the ‘Dealing with problem firms’ section of our Dear Portfolio letter, which contains more detail of our concerns in relation to scam/churn activities, circumvention of our rules and firms’ inappropriate use of introducers; and
- our Protect yourself from scams web page, noting this includes a warning that consumers that have invested in a scam may be targeted again by scammers offering to get your money back.
If your concerns persist, we ask that you report them to us. Options as to how to do so are available on our Contact us web page.
Significant past communications to the CFD portfolio
On 1 July 2019, we released a Press Release and Policy Statement PS19/18 setting out final rules for CFDs as set out in our handbook at COBS 22.5. These require firms that offer CFDs and CFD-like options to retail consumers to:
- limit leverage to between 30:1 and 2:1 depending on the underlying asset;
- close out a customer’s position when their funds fall to 50% of the margin needed to maintain them;
- provide protections that guarantee a client cannot lose more than the total funds in their account;
- stop offering current and potential retail customers cash or other inducements; and
- provide a standardised risk warning, telling potential customers the percentage of the firm’s retail client accounts that make losses
On 10 January 2018, we published a ‘Dear CEO’ letter following a project designed to assess whether contract for difference (CFD) providers and distributors delivered CFDs to the intended target market, paid due regard to the interests of customers and treated them fairly.
The findings suggested that CFD providers and distributors might be failing to conduct their activities in accordance with our Principles for Businesses, the Client’s best interests rule (COBS 2.1.1R) and SYSC.
On 2 February 2016, we published a ‘Dear CEO’ letter following a review that assessed client take-on at ten firms offering CFD products. Our review found some firms did not assess appropriateness and warn clients for whom CFDs were not appropriate and that some firms did not have adequate anti-money laundering systems and controls.