Peut-être Marc. Je comprends ton analyse. Sorte de chasse gardée identitaire avec des spécificités propres au pays
A nouveau extrait du FT courant 2015
Appropriate bucket shop regulation needed (and coming)
How would you describe bets where you might lose (or double) your stake every time the dollar moved by half a cent against the euro? Heroic, foolhardy, tempting or terrifying, perhaps.
What about appropriate?
They’re supposed to be, so far as European law is concerned. Online foreign exchange brokers aren’t running casinos, they’re selling complex financial derivatives to retail customers, which comes with a duty of care. The real question for a booming industry (and the regulators overseeing it) is whether that duty is fulfilled.Whenever a client signs up for something exotic, such as trade with large amounts of leverage using a contract for difference, the broker is supposed to learn enough about the person to decide whether CFD trading would be appropriate.
If it isn’t, the broker doesn’t have to turn away a customer determined to trade, but they must tell the person the product isn’t appropriate, along with clear warnings about the risks involved.
The rules are laid out under the Markets in Financial Instruments Directive, known as MIFID. A 2011 inspection of CFD and spread betting firms by the Central Bank of Ireland gives a good sense of what is required just to learn about a prospective client:
The application form should obtain the following information from clients/potential clients (Regulation 94(9)(a)):
1. Type of service with which the client is familiar;
2. Type of transaction with which the client is familiar; and
3. Type of financial instrument with which the client is familiar.
In relation to the transactions which the client has carried out, information should be obtained on each of the following (Regulation 94(9)(b)):
1. The nature of the transactions the client has carried out;
2. The volume of the client’s financial transactions;
3. The frequency of the financial transactions carried out; and
4. The period over which the transactions were carried out.
In relation to education and profession (Regulation 94(9)(c) the firm should obtain at least one of the following:
1. The education level of the client; or
2. The profession or former profession of the client.
The Irish review of four firms found “a significant proportion of the application forms used by firms were inadequate”, many forms were not fully completed. It also said, “if the firm deems the service/product is not appropriate, it must warn the client or potential client of this under Regulation 76(5). We noted a number of instances where clients were not warned that the service was not appropriate for them.”
Officials also raised concerns about the way in which products were marketed, singling out use of the word “easy” as a problem: “References to CFD/spread betting being “easy” are not appropriate given that CFD/spread betting is complex and high risk.”
Four years later and the online broking industry is booming. In the UK there are now about 90 regulated firms offering CFD trading, a fifth under the eye of the Financial Conduct Authority, while the rest have a regulatory “passport” to operate after registering elsewhere in the European Union, typically Cyprus.
Those brokers are in an advertising arms race, often using referrals from websites in a tactic known as affiliate marketing to attract day-traders punting from their smartphone. The London listed Plus500, for instance, reported signing up 67,000 new customers last year. IG, the largest CFD provider, has announced plans to develop a new suite of mobile apps aimed at client acquisition.
It seems a reasonable question to ask whether, in this rush for customers, all the rules are followed. Computerised systems can be used to filter customers and apply warnings, but the process is still likely to require significant people and resources to oversee it.
Also, consider findings from the Autorité des Marchés Financiers, the French regulator, which found over a four year period nine out of ten customers of retail foreign exchange brokers lost money, almost €10,900 on average. Can these products really be appropriate if just about everyone is losing money?
- – - – - -
With that in mind and in lieu of an industry response, we asked three questions about their approach to five of the largest brokers — CMC Markets, FXCM, IG, Saxobank and Plus500. None of the five have been accused of breaking the rules.
What steps do you take to ensure products are appropriate for European clients?
How many staff are dedicated to reviewing/overseeing these judgements about appropriateness?
And, in 2014, how many clients/potential clients received a warning that a product was not appropriate for them?
FXCM declined to comment. Plus500 did not respond to requests for comment.
CMC Markets said it must ask about relevant client knowledge and experience, and uses that info to assess appropriateness. For clients classified as “non-appropriate” communication “centres around education and the use of the demo account in order to practice trading as much as they can before trading on the live account. Each client that we deem non appropriate will be advised accordingly and in some cases, applications are rejected outright.” The company has compliance “resources”in every country it operates in, as well as a central team.
IG said it has 15 people dedicated to customers opening accounts, obtains a full history of client experience, and also conducts a second “wealth test” before making any determinations about a client. It has a compliance person in each country in which it operates, as well as the central team.
IG also said customers trading FX were slightly more successful than overall, and that 60 per cent of client trades were winners. Losses come from risk management, in that clients tend to let losses run in the hope they turn around, while closing out winners quickly. “The onus is on us to promote better risk management. Ultimately we want clients to be as successful as possible, because we make money from trading,” it said.
Saxobank said,” all clients are urged to take an appropriateness test and Saxo Bank’s assessment of the client’s test including potential risk warnings is available on Saxo Bank’s multi-asset online trading platform, SaxoTrader. Any risk warning will also pop-up whenever a client logs onto the platform.” Bjørn Krog Andersen, head of Legal & Compliance, runs a team of 13 full-time employees, it said.
The brokers declined to say how often customers were warned a product was not appropriate. CMC said a majority of its clients were deemed appropriate. IG cited competitive reasons, “as we think we are one of the few companies that do wealth checks we do not want to publicly declare any further details of the sorts of numbers that pass or fail them.”
SaxoBank said, “we are unfortunately not allowed under Danish law to make any specific comments on any client (or potential client) relationships.” We asked the Danish FSA if that was the case, and it said “banks are free to disclose information that does not include business secrets or any information regarding individual customers.”
The FCA has started to look more closely at online brokers, launching a thematic review of the CFD industry early last year which includes onboarding processes and questions of appropriateness. Closer scrutiny of the way online brokers recruit and communicate with clients might help to discourage punters who shouldn’t be anywhere near derivatives trading. The UK regulator declined to comment.
When it comes to reforms such as a cap on leverage or minimum balances — requiring a €20,000 initial deposit to trade CFDs might solve the appropriateness problem at a stroke — our understanding is the UK regulator would prefer pan-European action. There is no point pushing more punters towards Cyprus, after all.
Some might also view existing rules as sufficient, assuming they are rigorously enforced. But also note some reform is on the way in the next set of European regs, MIFID II, which must be applied by member states by January 2017.
MIFID II has a greater focus on consumer protection — for instance allowing authorities to ban or limit the marketing, distribution and sale of financial products such as CFDs where there is “a significant investor protection concern”.
Skip to pages 190 to 195 in the Technical Advice to the Commission published in December by the European Securities and Markets Authority. Some of the factors which might prompt concerns include the complexity of terms and conditions, the size and probability of loses, the type of clients, the visibility of risks, leverage inherent in a product and selling practices associated with it.
Or to put it another way, if there isn’t already, it looks like by 2017 there will be enough scope for regulators to say nine out of ten clients losing money is a problem we should tackle.
Dans une interview d'un responsable IG, ce responsable déclare que sa peur se situe à ce que la colère du régulateur provienne d'un broker lambda déconnant, impactant négativement tous le reste de l'industrie pour moins de tolérance.
Wait and see...