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Current state of the Retail CFD Broking Industry and Regulation

Whilst most of the comment from our sector is focused on oil, indices or economic data etc, there is generally very little in the way of navel gazing.  Even when the retail Spread Bettors/CFD providers were flying, it would always be odd to read any comment about them.

But now the foot is very much in the bear camp, as the ‘responsible’ providers struggle to keep expectations buoyant in the face of the recent regulatory strait-jacket that has mullered revenues. The well-known players (IG, Plus 500 and CMC) are all at recent lows, indeed CMC is at an all time nadir, as investors fight shy of the sector.

Coupled to this is the simple fact that, with nearly all the favourite markets sitting in range bound conditions, the outlook for Q1 returns would probably not have been looking particularly optimistic, even in the best of times. But now, with retail client’s activities being heavily restricted, the daily revenues will probably be doubly impacted.

Of course, the various CFD/FX platforms can ‘encourage’ clients to open accounts with their non-European units but, whilst this might seem a reasonable reaction, it adds another layer to opening accounts and removes most of the protection that clients enjoy under the European regulatory framework.  Spread Betting providers are in an even deeper hole as the product is only really recognised, from a tax-free level, in the UK so the reduction in leverage is really hurting.

Of course, no one loves their bookmaker, but the recent actions of the regulators do seem remarkably counter-productive. Yes, overall client losses have fallen in the last 6 months or so where the UK/Euro companies are concerned, but the data carefully collected by the FCA misses one glaring fact: clients are now far more likely to sign up with dubious operators from the less onerous parts of the globe where leverage is still available and these revenues are being neither reported or regulated (nor taxed!).  IG’s Q3 numbers are out tomorrow.

Risk Warning: 64% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Disclaimer: This communication is for informational purposes only and should not be viewed as any form of recommendation as to a particular course of action or as investment advice. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Opinions, estimates and assumptions expressed herein are made as of the date of this communication and are subject to change without notice. This communication has been prepared based upon information, including market prices, data and other information, believed to be reliable; however, TigerWit does not warrant its completeness or accuracy. All market prices and market data contained in or attached to this communication are indicative and subject to change without notice.

Simon Denham

Simon has over twenty years of industry experience in the retail broking industry. In 2003 he founded and was CEO of Capital Spreads (part of London Capital Group) and most recently founded Mercor Index which was acquired by TigerWit in 2018. His insights and comments on global financial markets regularly appear in national press across print, online and broadcast.

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