There has been much talk recently of the implementation of the Financial Instruments Directive (MiFID) and EU legislation from ’07 and some of the more recent FSA edicts.The outcome has been that spread firms wouldn’t segregate large traders so that big trade would show as part of the spread/CFD’s firms balance sheet and if required could be use to hedge the position. Of course as it wasn’t ring fenced this meant that the client was exposed if the trading firm ran into financial difficulty.
Spread size to rise?
So the current situation means that the spread boys need to have the funds at all times to cover worst-case scenarios. Obviously this means that there is less money sloshing around. It remains to be seen what this means to spread traders, hopefully we won’t see an increase in spread sizes. In the longer term for the industry it could be open season M&A’s.Interesting times in the world of financial trading, as always happy trading!