The UK’s Financial Conduct Authority (FCA) made waves today when the foreign exchange and contracts for difference (CFDs) regulator issued a consolation paper to companies from the industry – the paper outlined several proposed changes to the existing regulatory framework that polices conduct of rolling spot FX, CFDs and spread betting providers.
Following the announcement, the FCA has given companies until March 7th, 2017 to submit their comments directly to the regulator on listed proposed changes. The proposals themselves are ultimately designed to help better shield retail traders are listed below:
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For its part, GAIN Capital (NYSE:GCAP) has weighed in on the proposals, offering an endorsement of the precautionary measures for clients that will aim to fortify consumer protection. In addition, GAIN is also in favor of supporting all measures meant to curb aggressive marketing to inexperienced investors. A dearth of education has routinely been cited as an issue for FX and CFD traders, making them vulnerable to such instruments without understanding the risks incurred.
Moreover, the company has also noted a parallel in its current practices with much of the proposed changes by the FCA, suggesting that implementing such requirements will not require much reconciliation or derivation from its current practices or procedures. The broker also stated that it looks forward to working with the FCA over the next three/four months as well.
Unfortunately for GAIN, its shareholders were not as optimistic of the news, with the company’s stock (NYSE:GCAP) crashing -9.09% during US trading to $6.20 at the time of writing.
Other groups are perhaps due for more of a change, given the leverage cap, which could be the biggest alteration for brokers. By issuing a mandatory threshold for newer clients, the consequences could be manifold, namely for brokers who have thus far operated without any such restrictions.