Do not invest more money than you can afford to lose.
Forex brokerage IG Group (LON:IGG) invites clients to share their opinion with the UK Financial Conduct Authority (FCA) in regards to the recent proposals to change the regulation of forex, spread betting and contracts for difference (CFDs) trading, IG Group CEO Peter Hetherington said in a statement on Friday.
Investors can send their opinions to the FCA by mail or e-mail or by using a form available on the regulator’s website. In addition, IG Group’s client support team will assist clients and respond to any inquiries related to the matter.
“The FCA is seeking to raise conduct standards across the industry, to ensure fair outcomes for all UK clients – and IG completely supports this. However, we think there may be tools that could better help the FCA in its important work,” Hetherington said in the statement.
Following the recommendations and guidelines of the European Securities and Markets Authority (ESMA) from mid-October, the FCA is setting a new leverage maximum of 50:1 (25:1 for inexperienced traders with less than 12 months of trading). It is also banning bonuses or other benefits to promote risky trading instruments. The Cyprus Securities and Exchange Commission (CySEC) has also announced it will alter its requirements in line with ESMA’s recommendations. While the new requirements set by the CySEC sounds rather recommendation, the UK watchdog uses a more compulsory tone.
At this point, the new rules are proposals and the regulator is still collecting seeking market participants’ feedback.
Below are the new margins caps as proposed by the FCA:
Clients with less than 12 months’ trading experience | All other clients | |
Major currencies | 25:1 (or 4% margin) | 50:1 (or 2% margin) |
Major indices, gold, minor currencies | 20:1 (or 5% margin) | 40:1 (or 2.5% margin) |
Minor indices, commodities | 10:1 (or 10% margin) | 20:1 (or 5% margin) |
Shares | 5:1 (or 20% margin) | 10:1 (or 10% margin) |
According to IG Group’s head, some of FCA’s proposals are could be altered so that they better help the regulator in its work. Following are some such proposals and the specialist’s comments:
Firms must disclose their average client profit/loss, and use standardised risk warnings: This seems sensible to us. We believe in transparency and we think it is really important that people understand CFDs and spread betting before they open an account.
No bonus promotions allowed: This appears to be a good measure. We don’t think bonus promotions should be an important tool for winning clients.
A full review of rules relating to binaries: The FCA believes that the inherent features of binary bets make them inappropriate for many retail investors. We believe binary bets and binary options are a useful tool for retail traders, if they are marketed and sold responsibly.
Shortly after the FCA proposed rule amendments were announced, IG Group, together with CMC Markets and Gain Capital’s City Index formed a CFD providers association with the aim to unite UK brokers in discussing and fighting the planned changes. The lobby organization will facilitate brokers in communicating their concerns and worries.
IG Group is based in the UK and operates worldwide with offices in 15 countries. It is regulated by the FCA, but its subsidiaries are also regulated by the relevant authorities in the countries where they operate. The broker offers access to more than 10,000 markets, including forex, indices, shares, exchange-traded funds (ETFs), and binary options. In the UK it also offers spread betting and is a licensed bookmaker by the UK’s Gambling Commission.
