Irish Finance Minister Brian Lenihan will publish new rules regulating derivatives within a month, forcing investors to disclose the building of stakes in companies using such instruments. The new rules will govern so-called contracts for difference, which enable investors to bet that a share price will rise or fall without owning any of the stock. Investors can agree at a later date to acquire the underlying shares from their CFD providers.
“We expect to have legislation on the matter published within the next four weeks,” a spokesman for the Dublin-based Finance Ministry said, without giving any details. Last year, the U.K.’s Financial Services Authority said it would bring forward the introduction of new rules which required long positions which use CFDs to be made public when holdings reach 3 percent.
Filed under: CFD News by LearnCFDs.com
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Tracking SmartStream has announced that CMC Markets, a financial spread betting, CFD trading and FX trading company, has gone live on TLM OnDemand, SmartStream’s SaaS reconciliation service. To further enhance its operational efficiency and client service, CMC Markets selected SmartStream’s TLM OnDemand that offers the market leading reconciliations functionality as fully managed service. Further, the implementation program offered by the service would enable the firm to benefit from automated transaction processing that lowers exceptions and improves operational efficiency. After a short period of internal testing, TLM OnDemand in now live at CMC Markets processing the firm’s cash transactions.
Colleen Bohm, finance systems manager at CMC Markets, said: “TLM OnDemand was attractive because it introduces automated transaction processing with proven technology that will enable us to improve efficiency and lower costs. It is testament to the collaborative effort between CMC Markets and SmartStream that we have, in a short period of time, managed to install, test and go live with an entirely new solution for our back office environment.”
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Providers of contracts for difference who advertised to inexperienced investors and acted to profit from their losses could face court action for compensation, a class action lawyer said. On Saturday, Weekend Business revealed an industry secret of how some providers of the risky derivatives profited from losses of their worst-performing customers, then aggressively pursued them for their debts. The corporate regulator regards contracts for difference as riskier than gambling because potential losses can be far greater than the initial investment.
Australia’s second largest provider, CMC Markets, acted to profit from customer losses by profiling its customers and placing them into A-book, B-book and C-book categories. A CMC document titled Dealing Desk Manual said the C-book was ”the classification for clients with a past history of excessive loss on their account and the propensity to churn their Australian equity only positions”. BusinessDay has established CMC did not hedge, or lay-off risk from customer losses on the C-book, meaning CMC profited from these customers’ losses. CMC has said it no longer profiles customers, ending the practice in June last year. It continues to profit from customer losses from an unhedged portion of its customers’ trades.
Ken Fowlie, an executive director of the law firm Slater & Gordon, said unconscionable dealings provisions in the Corporations Act had given investors opportunities to seek compensation. ”The authorities seem to point to the fact that behaviour towards customers that seeks to profit from them in an inappropriate way, that really does open up a company to a claim of unconscionable conduct,” Mr Fowlie said. But the managing director of the litigation funder IMF, Hugh McLernon, said that while he did not know the situation in detail, a case based on CMC’s reported actions would be hard to argue.
CFD Legal Action
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On May 14, 2010, the British Columbia Securities Commission (BCSC) granted relief to CMC Markets UK plc and CMC Markets Canada Inc. (together, CMC Markets) that will permit CMC Markets to distribute “contracts for difference” (CFDs) and foreign exchange cost contracts (forex) to British Columbia investors without the necessity of a prospectus filing.
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