LeapRate Exclusive… While much of the attention being paid to ESMA’s new rules governing Retail FX and CFD brokerage and trading has been focused on the client-facing no-bonus and leverage-cap parts of the legislation, in the back offices of many Forex brokers the past few weeks have been spent rapidly redoing advertising and marketing campaigns.
Online ads are the lifeblood of the Retail FX and CFD industry, with many brokers pouring anywhere from 5-25% of their Profits back into online campaigns across a wide variety of media. Given the fairly high client churn rate and ultra-competitive nature of the industry, even the most successful broker with healthy levels of client deposits and trading volumes is worried about where next-month’s and next year’s volumes will come from.
The new ESMA rules, which officially kick tomorrow on August 1, require (among other things) that marketing material include:
a standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.
Most brokers, which often run dozens of different simultaneous ad campaigns encompassing several different languages, have been working hard behind the scenes to redo all their ads and fit (often into small physical ad spots) long-winded text such as “% of retail investor accounts lose money when trading CFDs with us…”. And, have been working furiously with their IB and Affiliate networks to take down all old ads, to be replaced with the new ones (most of which aren’t yet ready).
More-so than many other industries, Retail FX brokers often rely on a wide network of third party IBs (introducing brokers) and Affiliates to bring them a steady stream of clients. The brokers supply the ads and landing pages with each IB/Affiliate having a unique link identifier to sort and manage where the inbound traffic came from. For many brokers, the majority of their ads ‘out there’ are being placed not by the company itself, but by these third parties.
We are aware of a number of FX brokers serving EU clients which aren’t quite prepared for the August 1 deadline, and have been approaching all third party advertisers on their behalf instructing them to take down all ads shown to European IP addresses.