The Financial Services Authority (FSA), the UK’s financial regulator, is to issue new disclosure rules on contracts for difference (CfDs).
Following its November 2007 CfDs Consultation Paper, the FSA has concluded that existing share and CfD holdings in the same company should be aggregated for disclosure purposes, to address concerns relating to voting rights and corporate influence. The aggregated disclosure threshold will be at 3%, in line with the existing initial disclosure threshold.
An exemption will be made for CfD writers who act as intermediaries, similar to the Takeover Panel’s Recognised Intermediary exemption to reduce unnecessary disclosures. A policy statement is expected from the FSA in September, as well as a feedback statement on consultation responses and draft rules for implementation. Market participants will receive the final rules in February 2009, which must be implemented within six months.
Contracts for difference are over-the-counter derivatives that achieve an economic exposure to the price movement of an underlying security and are commonly used instead of a shareholding to avoid stamp duty.
“Our goal is to provide an effective and proportionate disclosure regime that works for all involved, and sustains market confidence and efficiency,” said Alexander Justham, director of markets at the FSA, in a statement. “We have received extensive feedback on this issue and we recognise that views differ widely across the market.
Taking this into account we have devised a solution that meets the concerns and issues raised.
We would like to thank all those who provided feedback.”