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.

Read this next

Executive Moves

TopFX promotes Omar Al-Janabi to head of sales and business development

Prime brokerage firm TopFX has strengthened its Middle East operations with the promotion of Omar Al-Janabi, who is taking on an expanded role as global head of sales and business development.

Retail FX

Plus500 says 2022 revenue to be ‘significantly’ ahead of analysts’ estimates

Israeli-based, but London-stock market listed Plus500 said it expects annual revenue and earnings to be ahead of analysts’ estimates even as trading levels normalised from record volumes in the first quarter.

Digital Assets

Crypto derivatives giant BitMEX launches spot market

Crypto exchange BitMEX is looking to branch out of its singular focus on crypto derivatives with a suite of new product offerings. Although derivatives are to remain at the heart of BitMEX’s business, the popular platform will add spot crypto trading as it aims to aggressively grow their user base.


PrimeXM reports mixed trading volumes for April

PrimeXM has reported weaker trading volumes for April 2022, in line with other institutional and retail platforms that saw the activity of their clients dropped compared to a month earlier.

Digital Assets

DLT Finance approved by BaFin to support brokerage and custody of digital assets

DLT Finance is already partnered with big names within the digital asset space, including Kraken, Bitstamp, B2C2, and Bittrex.

Institutional FX

LUKB taps vestr to launch actively managed products, AMCs

The partnership with vestr goes to show the growing importance of digitising the active investment management space.

Digital Assets

Jewel taps Tokeny to launch stablecoin-as-a-service solution on Polygon

Jewel aims to offer a stablecoin-as-a-service solution to other digital asset and financial institutions B2B, allowing those businesses to provide cheaper, easier and near real time payments with stablecoins issued and redeemable directly at the bank level at Jewel.

Industry News

SEC charges $410+ million Ponzi scheme with pre-IPO shares

We allege that the defendants deceived investors about the pre-IPO shares they held, how much they were charging in fees, and who was controlling the business—all while paying themselves more than $75 million.

Industry News

FNZ taps data analytics GIST to address ESG ratings bias

The allocation of capital is critical to driving the change required to transition to net-zero and building a more sustainable economy and society.