FSA confirms new CFD rules despite dissent

The UK Financial Services Authority (FSA) will go ahead with rules forcing general disclosure of holdings of contracts for difference (CFDs), despite market concerns that the cost would be too high.

The FSA currently compels investors to disclose all holdings of shares that represent more than 3% of a company's stock. Only two exceptions will be granted - market makers will be allowed to hold up to 10% in shares, and credit institutions and investment firms will be allowed up to 5% on the trading book, in both cases on condition that they do not use the voting rights attached to the shares.

The new rules will include long CFD positions as well as shares, at an estimated additional cost of up to £17 million up front and another £3 million a year. Exempting investment firms cut the compliance cost from earlier estimates of up to £50 million, the FSA said.

But the proposals have already met with resistance from investors. The FSA said that it had received feedback complaining that the rules dealt with "'potential' market failures that were not in fact manifest and did not need addressing". There was no real evidence of market failures caused by CFDs, critics added.

See also: FSA to order CFD disclosure