Spread betting firms’ shares plummet following FCA clampdown
Market leaders play down impact of proposed changes despite a share price drop of more than 40% at some companies
Shares in leading spread betting firms have plummeted following new proposals from the Financial Conduct Authority (FCA) designed to protect retail consumers.
The FCA proposed a package of measures, including limits on the amounts a client can lose, standardised risk warnings and mandatory disclosure of profit-loss ratios on client accounts.
The financial regulator said it had concerns about the number of retail customers opening and trading spread betting style accounts, with 82% of customers losing money.
The FCA announcement prompted a major share selloff, with market leader IG Group falling more than 40% to 500p and rival CMC Markets dropping 35% to 115p.
CMC attempted to downplay the impact of the changes, saying it already focused on higher-value experienced clients who understood the markets, rather than high-churn clients.
The firm said in a statement: “CMC’s business model and ongoing strategy is focused on generating revenue from client trading costs and therefore believes in establishing long-term client relationships.”
It added: “CMC recognises the FCA is endeavouring to ensure that any regulation is delivered in a balanced fashion and looks forward to working closely with the FCA over the coming months.”
IG Group said in a statement: “The Company recognises that there are shortcomings in the approach to the marketing of [spread betting products] by certain firms, often operating from outside the UK. The Company has operated and will continue to operate to the highest standards in the industry, and its initial view is that certain of the FCA proposals could enhance client outcomes.”