Spread-betting shares slashed after regulator cracks down
FCA calls for stricter risk warnings and cap on 'borrowed' funds in bid to protect investors' money

London-listed spread-betting firms crashed yesterday afternoon, losing a combined total of £1.3bn "in minutes" after the Financial Conduct Authority (FCA) announced a crackdown on products, reports The Independent.
In a bid to protect investors, the watchdog has proposed tougher rules for "contract for difference" (CFD) products, which allows punters to speculate on a shift in a market without directly owning any of the underlying shares, securities or currencies in question.
As a result, shares in IG Group, which controls about 40 per cent of the market, dropped 30 per cent, "or the equivalent of £800m", while CMC Markets shed 29 per cent, Aim-listed Plus500 lost around a third of its value and Playtech fell seven per cent.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Around 125,000 people are active spread-betters, but the FCA found 82 per cent of customers lost an average of £2,200 a year.
"Punters deposit money with the broker and use it as collateral to trade a much larger amount - sometimes as much as 200 times their deposit - and magnify their positions," says the Financial Times.
This means, says the BBC, "that a small movement in the price of shares can result in the security deposit an investor has put up - the margin - being wiped out".
Complex investments are often sold to ordinary investors online and, adds the broadcaster, spread-betting firms are "relentless in recruiting them, by blazoning their brands on football shirts, on public transport and in free newspapers".
Christopher Woolard of the FCA said: "We have serious concerns that an increasing number of retail clients... can incur rapid, large and unexpected losses."
The watchdog's proposals, aimed at saving ordinary investors money, include a cap on the amount of "borrowed" funds that can be traded and for products to carry stricter, standardised risk warnings, as well as stating the proportion of winners and losers.
IG Group said it recognised "shortcomings in the approach to the marketing of CFDs" by certain firms, but argued the proposals were misguided as they would not apply to EU companies that "passport" into the UK.
A small number of companies dominate the market but of the 226 that are active overall, around 130 "promote their online trading from elsewhere in Europe, mostly from Cyprus", says the BBC.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
5 fundamentally funny cartoons about the US Constitution
Cartoons Artists take on Sharpie edits, wear and tear, and more
-
In search of paradise in Thailand's western isles
The Week Recommends 'Unspoiled spots' remain, providing a fascinating insight into the past
-
The fertility crisis: can Trump make America breed again?
Talking Point The self-styled 'fertilisation president', has been soliciting ideas on how to get Americans to have more babies
-
Labour shortages: the ‘most urgent problem’ facing the UK economy right now
Speed Read Britain is currently in the grip of an ‘employment crisis’
-
Will the energy war hurt Europe more than Russia?
Speed Read European Commission proposes a total ban on Russian oil
-
Will Elon Musk manage to take over Twitter?
Speed Read The world’s richest man has launched a hostile takeover bid worth $43bn
-
Shoppers urged not to buy into dodgy Black Friday deals
Speed Read Consumer watchdog says better prices can be had on most of the so-called bargain offers
-
Ryanair: readying for departure from London
Speed Read Plans to delist Ryanair from the London Stock Exchange could spell ‘another blow’ to the ‘dwindling’ London market
-
Out of fashion: Asos ‘curse’ has struck again
Speed Read Share price tumbles following the departure of CEO Nick Beighton
-
Universal Music’s blockbuster listing: don’t stop me now…
Speed Read Investors are betting heavily that the ‘boom in music streaming’, which has transformed Universal’s fortunes, ‘still has a long way to go’
-
EasyJet/Wizz: battle for air supremacy
Speed Read ‘Wizz’s cheeky takeover bid will have come as a blow to the corporate ego’