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:
- February 2019 FCA statement on onshoring ESMA’s temporary intervention measures for CFDs sold to retail clients
- December 2018 FCA CFDs Consultation Paper (CP18/38)
- June 2018 ESMA’s decision notice on temporary restriction on marketing, distribution or sale of contracts for differences to retail clients
- January 2018 Dear CEO letter: Providers and distributors of CFD products
- Our future focus
- Investor information
The European Securities and Markets Authority’s (ESMA) temporary intervention measures prohibiting binary options and restricting contract for difference products (CFDs) sold to retail clients will become part of UK domestic law on exit day as part of the EU (Withdrawal) Act. UK firms are required to comply with ESMA’s measures until they expire in April 2019. See our 22/02/2019 statement on onshoring ESMA’s temporary intervention measures on retail CFD and binary options products.
Consultation Paper (CP18/38) (7/12/2018)
ESMA decision notice on temporary restriction on marketing, distribution or sale of contract for differences to retail clients
The measures have been 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