Poland based Retail FX and CFDs broker XTB (WSE:XTB) has released an update on its plans for the Spanish market, given new strict regulations covering CFDs trading and the marketing of CFD trading products in Spain unveiled last year by Spanish financial regulator CNMV.

Spain accounted for more than 11% of XTB’s Revenues in 2023, making it one of the Company’s most important geos after its own home market in Poland (46% of Revenues).

XTB said that the analysis carried out by the Company showed that in accordance with the interpretative criteria issued by the CNMV:

a) The CNMV’s decision prohibits the advertising of CFDs and other business practices in Spain, regardless of the client’s place of residence, but not the trading itself. The sale of CFDs is permitted, provided that it occurs at the investor’s sole initiative. Therefore, the CNMV decision does not imply changes in the way retail investors can trade CFDs through intermediaries (i.e. brokers) of which they are already clients, nor does it prevent them from opening new accounts for trading CFDs, provided that the entities comply with all regulatory obligations.

b) Investment firms offering CFDs are prohibited from placing promotional information on their website regarding this type of product.

c) The CNMV decision prohibits all activities related to sponsoring events or organizations and brand advertising, if their purpose or effect is the direct or indirect advertising of CFDs, except where it is proven that such sponsoring or brand advertising is not intended to offer such products or services. In addition to the intention to limit indirect and general advertising of CFD trading using the entity’s brand or name through sportswear, this prohibition means that the entity may not also advertise certain products other than CFDs, if the promotional effect is similar.

According to XTB, the above means that in practice entities offering CFDs may not advertise their activities on the Spanish market to any extent, while the CNMV decision does not prohibit investing in CFDs, provided that this is at the investor’s sole initiative.

In view of the above, XTB said that it has decided that it intends to continue to operate on the Spanish market. Marketing restrictions on this market will be introduced immediately in accordance with the guidelines, and actions will be taken to optimise the cost side of the business.

In the opinion of the XTB Management Board, the changes have a negative impact in the medium and long term on the number of clients acquired by the company in the Spanish market, and consequently on the level of revenues generated from this market, although at this time the Management Board is unable to precisely and reliably quantify this impact.

At the same time, the Company indicates that for over two years XTB has not conducted any significant advertising activities related to CFDs in Spain, and the revenues of the XTB Capital Group generated on the Spanish market in 2023 amounted to approximately 11.3% of the consolidated revenues of the entire XTB Capital Group.

Interestingly, XTB shares took a 5% dive on the Warsaw Stock Exchange soon after it released its statement on Monday morning, even though – as indicated above – the Company hasn’t been marketing actively in Spain for the past two-plus years. However we’d also note that XTB shares had been hovering recently at about their all-time high, giving XTB a market capitalization of just above PLN 8 billion / USD $2 billion.

XTB share price today (Monday July 15, 2024). Source: Google Finance.