FCA Will Be Clear with Its CFDs Data Requirement

The Financial Conduct Authority (FCA) will be more transparent with its data requirements for instruments like contracts for differences (CFDs) and spread bets to support its market abuse investigations.

“Some Reporting Obligations Are Duplicative”

In her speech on Monday, Therese Chambers, the FCA’s Joint Executive Director of Enforcement and Market Oversight, stressed how the UK regulator is tackling various challenges related to market abuse.

“We know some reporting obligations are duplicative,” she said. “We understand there are challenges specific to certain instruments, like FX. And we understand the burden on some firms may be greater than others.”

Read more: FCA Allows 16,000 Firms to Skip Three Data Collections; Do CFD Providers Benefit?

She further pointed out that the regulator will be proportionate where the value of the data does not justify its cost and admitted that harmonisation with international standards might lower costs for firms and improve data quality. Furthermore, the agency will consult on removing fields that are not regularly used.

“We will also consider how to be smarter and more efficient with other data we receive, such as EMIR reports, for monitoring derivatives such as FX,” Chambers added.

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Firms “Must Have Adequate Systems”

The FCA regulates CFDs brokers, as well as the broader financial services industry, in the UK. However, according to the regulator, around 20 per cent of CFDs brokers — including spread betting and rolling forex providers — are conducting “little or no activity” and were labelled as “halo” firms.

Chambers further stated that the agency intervenes when firms “persistently discharge their responsibilities poorly.” She cited that the regulator recently imposed restrictions on Dinosaur Merchant Bank, preventing it from onboarding any new customers to its CFD business without the FCA’s permission. Notably, Dinosaur does not offer services to retail clients.

“Firms providing trading services must have adequate systems and controls to identify and report market abuse,” she added. “Where firms fail to improve after flaws are highlighted, we will act assertively.”