ESMA Outlines Complaints Related to CFD Brokers Tanked to Three Year Lows

During the first half of 2017 only about 10 percent of all complaints related to financial services were related to

The European Securities Markets Authority (ESMA) has issued a statistical account of complaints that are related to financial services in the first half of 2017. As the European regulators have increased pressure on retail-oriented brokers that are providing margin trading of forex and CFDs, the number of complaints on part of consumers has drastically decreased.

The document released by the ESMA, titled Report on Trends, Risks, and Vulnerabilities which was published earlier this week shows a steep decline in the number of complaints relating to CFDs, particularly since 2015.

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A Persistent Decline

According to the ESMA’s data, from more than 4,000 complaints related to financial services products, only about 400 were related to forex and CFDs brokers. The paper includes complaints that have been filed with national competent authorities during the first half of 2017.

The figure represents only about 10 percent of the total, a continued drop in the figure for the third year in a row. The data includes figures that have been collected from all EU-member states. The decline is consistent with numbers since 2015 when the figure spiked higher.

Post-SNB Conduct of Brokers Has Changed

The spike of complaints in 2015 was led higher by the SNB black swan event that wrecked havoc across the foreign exchange market and prompted big industry-wide changes. The CFD complaints data compares to about 1000 complaints received about fixed income trading and about 800 complaints about shares, stocks, and equities.

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Commenting on the announcement, the CFD and FX Association said: “Complaints relating to CFDs are low and falling consistently due to effective regulation and due to our members focusing on client protection. There has been real progress by our member firms towards improving service levels, protection, and client outcomes.”

“Our members have been working closely with regulators in countries such as UK, France, and Germany to roll out additional client protections, and it’s clear the steep decline in complaints shows these actions are working,” the official comment of the industry body continues.

Ongoing Consultations

The ESMA is currently reviewing the rules and regulations for retail-oriented brokers that are providing CFD trading to their clients. While many firms in the industry have shifted their conduct the EU-wide regulatory body is looking for ways to expand client protection.

Some of the most controversial measures include a limitation on leverage to 1:30 and a big number of additional requirements for brokers that would greatly limit competition in the industry.

“Client satisfaction rates amongst our membership are high, and the ESMA report underlines the need to view CFDs within the context of retail product complaints more broadly. CFD complaints are very low when you consider that tens of thousands of people trade CFDs every day, and our members alone execute over 200 million CFD trades for clients each year,” the CFD and FX association explained in a statement.

The proposals of ESMA resulted in an unprecedented response from consumers. The supra-national regulator has received close to 14,000 responses from clients that are not happy about the new regulatory regime that is currently being considered.

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