Spread betting firms slide on threat of new CFD rules
The threat of tough new Europe-wide regulations for ordinary investors buying contracts for difference (CFDs) — which Seán Quinn had used 10 years ago to secretly build a huge stake in Anglo Irish bank — has put the skids under leading spread-betting firms.
Shares in IG, CMC Markets, and Plus500 sank 14% or more after the EU’s securities watchdog said it may curb core parts of their market under sweeping new product powers from January.
The European Securities and Markets Authority, using powers set out in the overhaul of financial rules known as MiFID II, had outlined how it may curb leverage.
CFDs played a leading part in the years before the onset of the Irish banking crisis, when Mr Quinn built up a huge equity stake in Anglo Irish using the contracts.
Mr Quinn He faced huge losses as the margin calls on the CFDs soared as the Anglo share price started to slide from late 2007.
Before the crash, CFDs were widely used by retail investors in Ireland, helping boost the profits of brokers.
The authority also said it was weighing whether to “restrict the marketing, distribution or sale to retail clients of CFDs”.
Brokerages such as Plus500 market their offerings to retail investors through sponsorship deals with professional soccer clubs such as Atletico Madrid and Liverpool.
Real Madrid forward Cristiano Ronaldo, who has a partnership with Exness in London, touts the brokerage to his 66 million Twitter followers.
IG, based in London, said that more than half of its UK and EU clients may be “professional” investors not impacted by the rules. Both IG and CMC used to have major bases in Dublin.
