FCA consults on changes regarding post-Brexit rules for CFDs and binary options

Maria Nikolova

The changes in relation to rules covering binary options and CFDs reflect the assumption that UK firms will lose passporting rights after exit day.

The UK Financial Conduct Authority (FCA) has earlier today published its latest Quarterly Consultation Paper which outlines a set of proposed amendments to the Handbook. Some of the proposed changes are related to the UK’s withdrawal from the European Union, as the UK regulator has to fix deficiencies in any affected Handbook provisions.

The list of proposed changes in this Consultation Paper concerns, inter alia, Conduct of Business Sourcebook (COBS) 22.4 and 22.5. That is, the rules that ban the offering of binary options in the UK and that impose restrictions on the retail marketing, distribution and sale of contracts for differences (CFDs) and similar speculative investments.

In particular, the proposals represent consequential changes in relation to binary options and CFDs to reflect the assumption that UK firms will lose passporting rights after exit day. Additionally, the rules will not apply to EEA firms unless they have temporary permission, are in the financial services contracts regime as a supervised run-off firm or are a contractual run-off firm.

This means that the rules will not apply to EEA firms which are operating in the UK outside of those regimes. For instance, the rules will not apply to an EEA firm operating in the UK through the Overseas Persons Exclusion.

As a result of the changes, EEA firms operating outside the temporary regimes will be treated in the same way as third country firms.

The rules will automatically apply to temporary permission firms, supervised run-off firms and contractual run-off firms.

Let’s recall that, in July this year, the European Securities and Markets Authority (ESMA) published its opinion with regard to the product intervention measures proposed by the FCA. ESMA said the national measures outlined by the FCA are justified and proportionate except for:

  • (i) the FCA’s proposal not to apply the national restrictions to CFD-like option providers authorised in other Member States other than through a UK branch or tied agent in respect of the sale or distribution of those products to UK retail clients; and
  • (ii) the FCA’s proposal to apply a 30:1 leverage limit for CFDs referencing certain government bonds, instead of the 5:1 leverage limit in ESMA’s measures.

Read this next

Institutional FX

Broadridge helps SLIB to enhance cross-border proxy voting in France

“Together with our partners at SLIB, we have delivered an advanced voting and communications solution that makes it easier than ever for all investors, both those in France and in other markets, to seamlessly cast their votes in the companies they own.”

Digital Assets

FTX resumes salary payments to employees and contractors, except in Bahamas and Australia

“FTX also is making cash payments to selected non-U.S. vendors and service providers where necessary to preserve business operations, subject to the limits approved by the Bankruptcy Court. We recognize the hardship imposed by the temporary interruption in these payments and thank all of our valuable employees and partners for their support.”

Market News

Rishi Sunak’s reign in real data

After several weeks of Rishi Sunak’s appointment as the new Prime Minister, it is obvious that he has claimed quite the public support.

Digital Assets

CrossTower acquires BEQUANT to help crypto industry reset and consolidate

“We are stabilizing an industry with incredible promise; regaining trust; and rebuilding the future of finance.”

Retail FX

Plum launches crypto offering for EU residents

Plum has added crypto investing to its range of investment options in France, Belgium, Spain, and Ireland. Residents there will be able to buy and sell cryptocurrencies in their app with just a few taps, via services provided by Bitpanda.

Retail FX

FX/CFD and Crypto broker Quantfury launches fractional trading of stocks, ETFs, commodities

“Quantfury is advancing its unmatched trading and investing conditions further by making it even more affordable to Quantfurians out there. Fractional trading mode opens up more trading opportunities to the Quantfury global audience of more than 400,000 Quantfurians.”

Industry News

SEC awards $20 million to whistleblower despite degree of culpability and reporting delay

The Securities and Exchange Commission has awarded a whistleblower with $20 million for providing new and critical information that led to the success of an enforcement action.

Institutional FX

Tradesmarter’s white label WOW TRADER integrates with TradingView

Tradesmarter’s white label trading platform solution WOW TRADER has integrated with TradingView, the high performance and mobile friendly charting tool.

Industry News

ASIC loses fee overcharging case against Commonwealth Bank of Australia

“ASIC pursued this case because we believed CBA did not have robust compliance systems to ensure customers were being correctly charged. ASIC will carefully consider the judgment and continue to work to ensure large financial institutions charge fees correctly and put their customers first.”

<