What is spread betting and contracts for difference (CFDs)
These are products that allow you to speculate on the price of an asset without having to own it.
With this type of investment, you could get a large profit from a relatively small investment. But it does carry a higher level of risk that traditional share dealing. This means that you could lose more than your initial investment and end up owing money to the business.
Types of complaints we see
We hear from consumers who complain that:
- They didn't understand the risks involved
- A trade was carried out at the wrong price
- The prices were manipulated by the business
- The business closed some of their positions because they didn’t add more margin
- The business closed a position that shouldn't have been closed
- Their trades were cancelled because the business said they’d gained an unfair advantage
What we look at
When we look into a complaint about spread betting and CFDs, we'll look at:
- The terms and conditions of the agreement you've got with the business
- What the business told you and how they explained the service to you
- What they said they'd do in certain situations (for example, if you ran out of margin), and whether they carried this out fairly
We may also need to look at your trading history, depending on the complaint.
In assessing things, we'll also need to bear in mind the relevant Financial Conduct Authority (FCA) rules.
Most trading isn't advised. But if you were given advice, and want to complain about what you were given, this is something we can look into for you.
There are a few things we'll need to consider when looking into your case. We'll look at what information the business had about you before they made their recommendations, as well as what they said about how it would work.
Even if you selected your own trades, the business would need to assess if they think the investment is "appropriate" for you. That's because this is a high risk activity.
They'd ask you questions regarding your knowledge about, and experience of, the product or service concerned. If they haven't carried out this check - and if we don't think the account was appropriate for you - we're likely to say that the business has done something wrong.
Sometimes stop order are carried out at a worse price than you choose. This can happen when the market moves very quickly from above the target to a price much lower than the target. This is called "gapping" or "slippage".
Often this will happen when the market opens - if the price has moved significantly away from the previous day's closing price. It can also happen when the market moves quickly, such as after the announcement of important news or economic data.
We'll look at:
- the terms and conditions, and any other product documents you were given
- what you were told about how stop order would be executed
- what was happening in the underlying market at the time
We'll be unlikely to uphold the complaint if the business made it clear they couldn't guarantee stop orders would be carried out at the exact level you asked for.
But we'll also bear in mind how the business said it would treat the reverse scenario - that is, orders when a trade is executed at a better price than the one you chose.
If the business kept the profits when trades were carried out at a better price, but passed losses on to you when trades happened at a worse price, we'd probably say the business acted unfairly. This has been something that the FCA has fined businesses for previously.
An unfavourable market move could mean that you owe more than the amount you’ve staked. To protect against this, the business will need you to maintain a minimum margin requirement in your account.
If your account equity falls below the margin requirement, you’ll need to deposit more money to the account. This is known as “adding more margin”. If you don’t, the business may close some of your positions to prevent you owing them money.
If you put in a complaint with us, we'll look at the terms and conditions to see what the business said they would do if you ran out of margin. This might include whether they would contact you and how, and how they would select which positions to close.
If we’re satisfied that the business acted reasonably in closing your positions, it’s unlikely that we would uphold the complaint.
How to complain
Talk to the business first so that they have the chance to put things right. They need to give you their final response within eight weeks for most types of complaint. If you’re unhappy with their response, or if they don’t respond, let us know.
Find out more about making a complaint.
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