UK FCA proposes to bring in stricter rules for CFDs and spread betting companies, but investors can also do more to help themselves

The Armchair Trader
Financial services Media
trading cfds financial spread betting forex fx risk management fca regulation margin trading foreign exchange trading currency trading options trading futures trading financial education
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LONDON: 9th December 2016 – This week the Financial Conduct Authority’s (FCA) became the latest European regulator to introduce stricter rules to govern CFD (Contracts For Difference) providers and their onboarding of new clients. This represents a wider trend to bring more restrictions on the marketing and sale of margin trading accounts to the retail market.

The regulators are aiming to limit the amount of gearing that an inexperienced trader will be offered by their broker. This should go some way to mitigate some of the big losses that novice traders can be exposed to. Some brokerages have already been offering novice clients limited risk trading accounts, but the practise has not been widespread.

Leveraged products like Financial Spread Betting, CFDs and Forex trading enable traders to increase their exposure to trades, with their broker effectively lending money to the client to help them gear up their buying power. While this can make for sizeable profits when a trade goes to plan, it can also represent significant losses when a trade goes against the trader. In some cases, losses can total more than the balance a trader places with their broker.

As welcome as these measures will be, however, they are unlikely to make a significant dent in the FCA’s estimation that 82% of traders lose money trading with leveraged products. This figure is only likely to fall substantially when traders understand the nature of the products they are trading, the importance of a strategy and their own appetite for risk.

One of the key issues has been a lack of proper education for new traders about the risks – some of them not explicit – of trading with margin. While risk warnings have been obligatory for some time now, there has been a need for more independent education and guidance about the various online trading choices confronting new traders.

Tools like The Armchair Trader’s online quiz can help traders to identify the most appropriate products to access the financial markets based on their geographical location, the level of experience they have, their appetite for risk and the markets they want to trade. The Armchair Trader also includes further objective information on margin products, trading risks and the most popular markets available.



Marketing: Michael Morton, Co-founder, The Armchair Trader
Tel: 07960 440 144


About The Armchair Trader 

The Armchair Trader is an independent website dedicated to providing education resources for novice to intermediate traders. Established in 2010 to provide jargon-free intelligence on what is happening in the global online broking industry, its coverage is tailored to the requirements of private individuals, especially those with no track record in the financial industry that wish to learn more about trading financial markets. The Armchair Trader’s mission is to help traders make sense of the often complex and opaque world of online derivatives and stock trading, and to hopefully avoid some of the costly early mistakes. 

Press release distributed by PressHalo on behalf of The Armchair Trader, on 9th December, 2016.