Spain set to review CFD regulation

Maria Nikolova

More clarity on the proposed measures for investor protection is expected in the first half of 2017.

The list of regulators seeking to tighten the oversight of the offering of complex and high-risk financial products is growing. Spain’s CNMV (National Securities Market Commission) is the latest regulatory body to join this list.

The Spanish watchdog has published its 2017 Activity Plan based on four strategic areas, with enhanced investor protection being one of them.

The regulator does not elaborate on how precisely it will implement its goals, but notes that in the first half of 2017, it will “evaluate possible investor protection initiatives for complex high-risk products (such as CFDs)”. The CNMV also says it plans measures to tackle cold calling from financial intermediaries.

CNMV’s statement resembles a lot one of the alternatives that the Central Bank of Ireland has outlined in its attempt to limit investor losses. One of the options that the Irish regulator proposes is a ban on the sale and/or distribution of CFDs to Irish investors. The other option, which seems to be the one that the Spanish regulator is considering too, is introducing extra protection for investors instead of banning the CFD distribution altogether. The Irish regulator envisages measures like curbing maximum leverage and introducing negative balance protection. The Spanish regulator does not specify any particular steps in this direction.

Instead, the CNMV puts an emphasis on boosting investor education and reforming the Investor section of its website. The benefits of such a move, however, are not clear. Most likely, there will be a raft of warnings against unregulated companies – an approach that does not seem to be very effective, if we consider the experience of nations like France or Italy.

Let’s also note that CNMV’s Activity Plan does not mention binary options. It appears that this problem either does not exist in Spain (very unlikely) or is neglected at this point.

Meanwhile, the consultation regarding the CFD regulation proposals outlined by the UK Financial Conduct Authority (FCA) closed on March 7, 2017. We are impatient to see how the UK CFD landscape is reshaped as a result of the new rules. It is likely that the FCA will set the tone for the changes to be implemented by other European regulators.

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