(Reuters) - Spreadbetting group CMC Markets Plc said on Wednesday it was considering future options for its business after Britain’s finance watchdog proposed tightening regulation of the 3.5 billion pound ($4.4 billion) industry where most retail investors lose money.
The Financial Conduct Authority said last week it had found evidence of poor conduct across the market over the past six years and proposed changes, including a cap on use of leverage in betting in some cases.
Sky News reported on Tuesday that CMC could move its headquarters and its London-based contracts-for-difference (CFD) operations to Germany, where proposed new rules on spreadbetting are less draconian. (bit.ly/2hJZN1o)
CMC was set up nearly three decades ago by Peter Cruddas, its current chief executive who is also one of the City of London’s most prominent supporters of Britain’s exit from the European Union.
“CMC will consider all options open to the business to ensure that shareholder value is delivered whilst continuing to offer the highest levels of customer protection,” the company said in an emailed statement to Reuters.
“Until CMC has finished discussions with the UK and German regulators as part of the consultation process the board is not in a position to make any comment on the outcome of its review,” CMC said.
CFDs allow investors to bet on both the direction of a share price, currency or other financial product and the extent of the change in price.
The industry is regulated by European Union rules which have no caps on leverage. That means investors can take out bets that are far larger than their initial outlay, offering greater potential returns but also running the risk of huge losses.
France has already moved to ban digital advertising of CFDs and the Netherlands is considering a similar measure. Belgium has banned CFD trading, Cyprus has issued a warning to retail currency brokers and Germany has also announced new rules to curb spreadbetting.
CMC, which listed on the London stock market in February, has said that it welcomed a more balanced approach by German regulator Bafin.
CMC’s rivals include IG Group Plc, Plus500 Denmark’s Saxo Bank and FXCM Inc.
Sky News also reported that IG Group’s Chief Executive Peter Hetherington was in Germany on Tuesday to talk with BaFin about the reforms.
“The UK has been IG’s home market since the company was established in 1974, and we have absolutely no intention to change this,” IG’s Head of Investor Relations Kieran McKinney told Reuters.
Shares in CMC, IG and Plus500 all dropped more than 30 percent on Dec. 6, after the UK watchdog’s announcement.
CMC’s shares rose more than 3 percent early on Wednesday in reaction to Sky’s report. By 1249 GMT they were up 1.6 percent at 96.5 pence.
($1 = 0.7899 pounds)
Reporting by Noor Zainab Hussain in Bengaluru; Editing by Jane Merriman and Susan Fenton