XTB Faces Ban on Spanish CFD Ads; Market is 10% of Revenue

XTB, Poland's top retail trading business, announced today (Monday) that it would continue to operate in Spain despite the Spanish National Securities Market Commission's (CNMV) new limits on selling Contracts for Difference (CFDs).

XTB to Optimize Costs as Spain Clamps Down on CFD Advertising

The company's decision was made after a thorough assessment of the CNMV's interpretive criteria, which was released on July 12, 2024. This guideline explains how to deploy product intervention measures for CFDs and other leveraged products. XTB was the first to react to the changes, but other retail brokers selling CFDs in Spain, such as CMC Markets and Plus500, will also be impacted. The limits will apply to the whole business, not just XTB.

According to XTB, the CNMV's regulation forbids the promotion of CFDs and similar business activities in Spain, regardless of the client's location. However, trading is not prohibited, and CFD sales are authorized if started by the investor.

“As a result, the decision does not imply any changes in the way retail investors can trade CFDs through brokers they are already clients of, nor does it prevent them from opening new CFD trading accounts, provided that the entities meet all regulatory obligations,” says XTB.

The CNMV's view essentially prohibits investment businesses that sell CFDs from providing promotional material about these products on their websites. It also forbids sponsorships of events or organizations, as well as brand advertising that directly or indirectly promotes CFDs.

In a statement issued Monday, XTB reaffirmed its intention to continue operating in the Spanish market, stating, “Effective immediately, marketing restrictions compliant with the guidelines will be implemented in this market.”

XTB noted that these limitations may have a detrimental effect on new customer acquisition in Spain in the medium to long term, thereby hurting revenue levels. However, the business said that it could not accurately estimate this effect at the time of the release.

The Polish broker said that it had not performed substantial CFD-related promotional operations in Spain in more than two years. In 2023, the Spanish market contributed for roughly 11.3% of XTB's total group sales. Total sales of PLN 1,588.2 million in 2023, omitting Spain's results, would represent a revenue loss of almost PLN 180 million ($46 million).

Despite these guarantees, investors remained unconvinced, and XTB's Warsaw Stock Exchange shares plummeted 7% on Monday, hitting PLN 67.20. However, they remain close to the record high of PLN 76.

When the CNMV imposed the first limitations on CFD marketing a year ago, the business claimed the changes had a “minor” effect on its operations. The Polish multi-product broker said that the new restrictions had not resulted in “any significant changes” in its client acquisition rate.

XTB Promoted Passive Investing in Spain

Although the business claims it has not done much marketing in Spain, it did begin a campaign with VanEck at the end of May to encourage passive investing using ETFs. This partnership sought to improve Spain's savings culture and solve the country's insufficient savings capacity. Spain has a savings rate of less than 6%, compared to more than 12% in other European nations such as France and Belgium.

In short, XTB intends to continue operating in Spain while adjusting to new legal limits and pursuing new routes such as passive investment. The entire effect of these changes on revenue and customer acquisition remains to be seen, but the firm is ready to manage this complex environment.