The Financial Conduct Authority published findings from a multi-firm review of contracts for difference (CFD) providers’ compliance with the Consumer Duty “price and value” outcome, focusing on how firms deliver fair value for retail clients through their pricing, charges, disclosures, and target market controls. The FCA found inconsistent application of the Duty and identified shortcomings in firms’ fair value assessments and governance that could undermine firms’ ability to evidence that overall costs are reasonable compared with the benefits retail clients receive. The review sampled around 25% of regulated CFD manufacturers and distributors and examined board oversight, the quality and scope of fair value assessments, appropriateness testing, and the treatment and disclosure of spreads, commissions and overnight funding charges, including where clients run offsetting long and short positions. Positive practices included more holistic assessments that consider non-price factors (such as target market and consumer understanding), tailored assessments where firms had diversified into other products, strengthened appropriateness testing (including more robust question sets, higher pass thresholds, cooling-off periods and limits on retakes), and more proactive approaches to identifying and monitoring vulnerable clients. Areas for improvement included FVAs that focused narrowly on spreads and execution quality while giving limited attention to other material costs, use of narrow or non-UK peer groups, limited consideration of hedge counterparty pricing in price formation, wide variation in effective overnight funding rates without adequate justification, and insufficient disclosure of how these charges work and their impact. The FCA also observed standard industry practice of applying overnight funding charges on both legs of hedged positions without offset, and that only a small number of firms pay interest on retail clients’ margin deposits, with many firms not evidencing adequate consideration of whether paying interest would be appropriate. The FCA encouraged all firms manufacturing or distributing CFDs to retail clients to consider the findings and address gaps, will engage directly with selected firms to provide more detailed feedback, is considering further work in some areas identified, and will continue to assess ongoing compliance through supervisory oversight.
Financial Conduct Authority 2025-11-07
Financial Conduct Authority highlights inconsistent Consumer Duty fair value practices among CFD providers
The Financial Conduct Authority (FCA) released findings from a review of contracts for difference (CFD) providers, highlighting inconsistent compliance with the Consumer Duty "price and value" outcome. The review identified shortcomings in fair value assessments and governance, with firms often failing to justify costs relative to benefits for retail clients. The FCA urged firms to address these gaps and will maintain supervisory oversight and direct engagement with selected firms.