IG Group Endorses ESMA, FCA, Delaying CFD Regulations till 2018

The support follows IG Group's efforts to implement internal controls policing CFD use.

IG Group Holdings (LON:IGG) has endorsed today’s announcements by the UK’s Financial Conduct Authority (FCA) and ESMA. More specifically, the group has thrown its support behind today’s decision to delay the revamped FX and CFD regulations until 2018. They had previously been set for implementation in June.

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Today marked two announcements from both the FCA and ESMA, each of which foreshadowing changes upcoming in 2018. In terms of the FCA, a series of new regulations regarding FX and CFDs was postponed until 2018 given concerns surrounding the overall effectiveness of the current regulatory framework and ESMA’s heightened jurisdiction on the issue – beginning in 2018, ESMA will gain specific product intervention powers.

On its part, IG Group fully supports the FCA’s decision to stall the new regulations, which it hopes will achieve European harmonization via informed data analysis and planning.

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New powers

Following the implementation of MiFID II in January, ESMA will gain new powers to block certain financial products for a period of up to 12 months, requiring a reassessment at least every three months. This could become extremely relevant to the FX and CFD industry, as the group will maintain acting power to prohibit or restrict marketing efforts of whatever financial instruments it deems fit.

ESMA has long been concerned about the provision of speculative products, including CFDs, rolling spot FX, and binary options to retail investors. This was echoed by its recent stance on the state of consumer protection measures, which it asserted was not adequate. ESMA had previously hinted at a wide range of product intervention measures that it could undertake, including leverage restrictions, guaranteed limits on client losses, and others.

IG Group also is in agreement with ESMA and the FCA that the use of CFDs could be reined in slightly, as there are some individuals currently trading the instrument in an unsuitable manner. The group has also offered its support of the practices of the FCA and ESMA, especially in regard to those adopted under recent Q&A recommendations – this includes many areas such as appropriateness.

Despite the delays in the regulations, IG Group has already embarked on internal controls and assessment processes across its offering over the past year. Currently, IG Group requires applicants to provide detailed information regarding their trading history and reject applicants for CFDs that are deemed inappropriate, for example those who hold insufficient trading wealth – these efforts have also resulted in the use of Limited Risk Accounts.

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