"More Regulators May Follow Footsteps of Spain": CFDs Insiders' 2024 Forecast

After an eventful 2023, the financial services industry is now looking ahead to the new year, 2024. Many things have shaped the industry this year: Spain’s CFDs marketing restriction, consumer duty and crypto ad rules in the UK, plus the adoption of artificial intelligence (AI), and the industry expects more next year.

Although it is tough to accurately predict the future of any industry, trends and historical evidence always leave room for calculated forecasts. Two key areas where industry experts are expecting developments are the adoption of modern technology infrastructure and the imposition of new regulations.

Tech Will Be a Priority for Brokers

The advancement of technology has already forced brokers to rethink their tech infrastructure. And, this might continue to be a priority next year. The rise in AI has already encouraged many brokers and their technology providers to develop new infrastructure and services.

“One of the biggest trends we will see over the next year is a greater move towards brokers consolidating their tech stacks. This ticks a number of boxes for brokers in terms of cost savings, increased efficiencies, and enhancing the trader experience,” David Nussbaum, the Founder and CEO at Skale, told Finance Magnates.

“It also ties in with a trend we are seeing from our larger clients and prospects whose legacy systems are coming to their end of life. Rather than replicating existing systems, these brokers want to consolidate more seamlessly, cutting the time it takes to use and merge disparate systems and benefit from the cost reductions of a more streamlined approach.”

Muinmos’ Chief Technology Officer, Emil Kongelys, agrees with the focus on tech but thinks the priority will be to streamline the back end and research.

“For years, fintechs have invested mostly in the front office, cutting that extra microsecond, making sure the trader can get to the Alpha, and in return, giving the financial institution more volume. This is now changing, and more R&D goes into the arena of regtech, whether in onboarding, trade reporting, transactional monitoring, or market abuse monitoring,” Kongelys said.

“The focus for next year will continue to be on ease of use for traders,” Nussbaum added. “Making processes as simple and quick as possible for traders from the onboarding stage through to verification, deposits, and withdrawals will be key for client acquisition and retention. I believe we will see an increase in the use of Single Sign-Ons for traders so that they can access their trading platforms, traders’ area, and deposit funds, for example, all with a single set of credentials.”

More Regulations Are Expected

This year, many regulatory moves have disrupted the operations of the brokers offering CFDs, specifically marketing. South Korea, too, imposed restrictions on CFDs after evidence of market manipulation using the complex derivatives surfaced.

“More regulators may follow the footsteps of the Spanish regulator and impose further restrictions on the marketing of CFDs, inflicting another ‘blow’ to this line of financial products,” said Kongelys.

“The regulatory divergence inside the EU is growing; the Spanish CFDs measures are just the last measures taken by EU-based regulators, continuing a trend cemented by BaFIN, AMF, and AFM. Regulators are moving away from passporting rights and leaning towards the 'place of business' test. This regulatory divergence is, in essence, a crack in the European Union and its idea of unified financial markets. Despite the EU’s best efforts, we see this trend only intensifying and possibly causing conflicts between regulators.”

Lars Holst, the Founder and CEO at GCEX Group, believes that “the financial landscape is set to witness a significant surge in regulatory measures” next year. He added: “Globally, I expect regulatory frameworks to tighten across CFDs and crypto aimed at enhancing transparency and safeguarding investors.”

Crypto Approaches Mainstream

Crypto will be another area of focus across the industry, whether it be regulators, brokers, or retail and institutional investors. Europe is already set to adopt the Markets in Crypto-Assets Regulation (MiCA) rules next year. With the ongoing optimism, significant developments can be around crypto exchange-traded funds in the US and growing institutional adoption.

“Institutional adoption of the main cryptocurrencies , such as BTC and ETH, will continue at a pace. The collapse of FTX and the disgrace of CZ from Binance has confirmed the need for separation of responsibilities that the institutional world has always believed in,” said Tom Higgins, Founder and CEO at Gold-i. “Stablecoins will grow as people realize their massive potential in removing monetary friction.”

“CBDCs will start taking shape, and as they operate like a 200% guaranteed stablecoin , will follow the same path as stablecoins,” he said, adding: “Global regulation will start to coalesce in crypto-friendly regions, and other, not-so-friendly, regions will, effectively, ban cryptos.”

Higgins further predicts that “the FX Prime of Prime model will be replicated in the crypto world, with new 24x7 POPS offering liquidity to smaller entities downstream. This liquidity will not be sourced from a single exchange but aggregated from OTC and exchange liquidity to give the best price, order book depth, reliability, and security.”

Meanwhile, Holst is also betting on a surge in demand for security token offerings next year, expecting “meaningful volume outside exchange tokens with investors looking for a more stable environment.”