FCA proposes permanent restrictions on CFDs, binary options

UK financial regulators plan a permanent ban on the sale of binary options to retail customers and restrictions on the sale, marketing and distribution of CFDs.

The Financial Conduct Authority published two consultation papers to make permanent measures put in place by European regulators earlier this year, banning binary options and limiting CFDs to expert investors. The FCA said it was also looking to extending this to "closely substitutable" products, which could include turbos.

Following the crackdown by the European Securities and Markets Authority earlier this year, which was supported by the FCA, the UK body said on Friday that it will consult separately in early 2019 on a potential ban on the sale of leveraged derivative products, including cryptocurrency CFDs, to retail consumers.

IG Group said the proposals had been anticipated by the company, and do not change its expectations on performance or group revenue.

CMC Markets said it does not offer any other closely substitutable products so that measure will have no impact on the group and that it generated immaterial revenue from crypto CFDs "so any ban will not have a material impact on the group".

CMC reiterated that over 40% of its UK and European revenue is generated by elective professional clients, which increases to 50% with its institutional business. CMC also generates 30% of its revenue from outside of Europe.

Plus500 said that it "already operates in compliance with these proposed changes" and "has never offered binary options and so is not impacted by this proposed intervention".

Analysts at Peel Hunt said CMC Markets is already subject to ESMA rules and the banning of binary products will result in an immaterial impact on revenue, equivalent to circa 2% of CMC revenue already taken out of forecasts and was already flagged by the ESMA rules.

"The new regulation could impact on new products offered by the industry although no changes to the core offering and these will only affect products to retail customers."