The effect of the FCA’s margin guidelines on core CFD business – Op Ed

Meir Velenski

This style of churn and burn has irked the FCA and once the FCA has highlighted a change, then it will only move in stricter lines, says Meir Velenski

London, Canary Wharf from Thames

Following the shock announcement from FCA Tuesday, which redraws the FCA guidelines on margin and bonuses that UK CFD/FX firms offer, is still reverberating in London.

What I have seen with U.K. firms is panic and distress . That’s no way to run a business.

Meir Velenski

UK CFD/FX firm’s responses have been to lobby the FCA to convince them to change their minds. Taking into consideration how misinformed and detached the FCA is with their arbitrary or lack of approach- is concerning. Firms needs to be aware of this and think outside the box.

Business levels

UK firms will lose significant levels of business and revenue, as the business model being used will not suit the new guidelines. Yet U.K. Firms are lobbying the FCA with the hope that the FCA will change their minds. This is the same as a premier league footballer challenging the referee after he has been booked. Zero value!

The  lack of wisdom and diversity in this tactic is reflective of the “old school” attitude providers have in adapting to change .

Present margins

Those firms that still believe that offering clients in the U.K. 1:200/300:400 or more gearing, are behaving foolishly. This style of churn and burn has irked the FCA and once the FCA has highlighted a change, then it will only move in stricter lines.

Present margins allow for enticing the public into trading with such small equity that the only result will be “close out”.

Moving on

The U.K. firms that have been effected by the FCA update need to take measure now and not hang around on a hope. Firms need to embrace the change and show the FCA that they are willing to change and adapt.

By moving ahead of the curve, instead of always reacting; the business is in full control and not being controlled.

Firms need to set up internal and external consultations to define a clear plan of attack, which markets, which clients, what marketing and other resources to consider.

If they don’t take action now , then clients, investors and even the staff will leave.

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