Find out about our expectations of providers and brokers of retail contract for differences (CFD) products, which include spread betting and rolling spot foreign exchange (FX).
We require firms to comply with our rules to ensure their CFD products are marketed and sold to the right consumers.
On this page find out about:
- the latest information on CFDs
- ESMA’s decision notice on temporary restriction on marketing, distribution or sale of CFDs to retail clients
- our Dear CEO letter to providers and distributors of CFD products
- our future focus
- investor information
On 26 April we released a statement on delay to publication of final rules for CFDs products and CFD-like options.
On 29 March we published a policy statement on product intervention measures for retail binary options. This document sets out our final position and Handbook rules to permanently prohibit the sale, marketing and distribution of binary options to retail consumers by firms that carry out activity in, or from, the UK.
On 27 March the European Securities and Markets Authority’s (ESMA) temporary intervention measures restricting contract for difference products (CFDs) sold to retail clients were renewed for a further 3 months from 1 May 2019. UK firms are required to comply with ESMA’s measures until they expire in July 2019. See ESMA's website for more information.
On 22 February we published a statement on onshoring ESMA's temporary intervention measures on retail CFDs and binary options products. In this statement, we confirmed that firms were required to comply with ESMA’s decision notices until they were due to expire on 1 April 2019 for binary options, and 30 April 2019 for CFDs.
On 7 December we published a consultation paper on restricting CFD products sold to retail clients. The document proposed permanent rules to restrict how CFDs and CFD-like options are marketed, distributed, and sold to retail consumers. The paper also included a discussion on whether other complex derivative products may pose similar risks of harm when sold to retail consumers and could benefit from similar measures.
ESMA decision notice on temporary restriction on marketing, distribution or sale of contract for differences to retail clients
The measures were published in the Official Journal of the European Union (OJ) on 1 July 2018. They were implemented from 1 August 2018 for CFDs and apply as follows:
1. Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, which vary according to the volatility of the underlying:
- 30:1 for major currency pairs;
- 20:1 for non-major currency pairs, gold and major indices;
- 10:1 for commodities other than gold and non-major equity indices;
- 5:1 for individual equities and other reference values;
- 2:1 for cryptocurrencies;
2. A margin close out rule on a per account basis. This will standardise the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more
retail client’s open CFDs;
3. Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses;
4. A restriction on the incentives offered to trade CFDs; and
5. A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.
Dear CEO letter – providers and distributors of CFD products: resolving failings which may cause significant consumer harm
Following the conclusion of a project that assessed whether CFD providers and distributors deliver the CFD product to the intended target market, pay due regard to the interests of customers and treat them fairly, we have published a Dear CEO letter for the attention of all CFD firms (PDF) that provide or distribute these financial instruments to retail customers.
There are a number of areas we will be focusing on, including but not limited to:
- attempts at circumvention of the product intervention measures, including
(i) financial promotions including prominence of the prescribed risk warning
(ii) inappropriate opting up of clients to elective professional
(iii) movement of clients to associated non-EEA entities
- firms’ prudential soundness including their management of negative balance protection
- firms’ treatment of clients in the course of Brexit related restructuring
- monitoring the activity of inward passport firms and their use of the Temporary Permissions Regime (if applicable)
If you are considering an investment in CFDs, we would advise that you check our list of unauthorised firms and individuals to avoid.
Furthermore, if you are also considering investing in crypto asset derivatives or binary bets/binary options, you should first review the following:
- FCA consultation in early 2019 (Chapter 1) on a potential ban on the sale, marketing and distribution of derivatives that reference cryptocurrencies to retail consumer
- FCA Guidance on Cryptoassets Consultation Paper (CP19/3)
- FCA Consumer warning about the risks of investing in cryptocurrency CFDs (14 November 2017)
- FCA Consumer warning about the risks of investing in binary options (14 November 2017)
- FCA Consultation Paper 18/37 – Binary Options
- FCA unauthorised binary options firms list
- Gambling Commission Binary options scam warning
- Gambling commission Binary options trading
- ScamSmart information on binary options scams
- City of London Police Fraudsters claim binary options being used for investment scams