The FCA is Enhancing regulation requirements for brokers and firms providing CFDS to retail traders. The FCA (Financial Conduct Authority) has published the CP16/40 Consultation Paper titled:”Enhancing conduct of business
rules for firms providing contract for difference products to retail clients” the policy in this consultation paper was developed in the context of the existing UK and EU regulatory framework.
- CFDs are simple, leveraged derivative financial instruments that brokerage firms commonly provide to retail traders via online trading platforms. CFD trading enables traders to speculate on price volatility of almost any underlying financial asset eg, shares, indices, currencies, commodities and even cryptocurrencies.CFDs are leveraged trading instruments which mean that they are traded on margin. Instead of funding the full value of the position, the trader invests a fraction which called “initial margin” to open the position. CFDs obtain the price arbitrage of the underlying asset between the opening trade and the closing trade.