Top three compliance challenges for CFD Brokers in 2025 and beyond

Contracts for Difference (CFDs) remain one of the most heavily scrutinised areas of retail trading. Regulators globally are sharpening their focus on the risks these products pose and the way firms manage them in practice. The themes are consistent: protect investors, prevent market abuse, and build operational resilience. In this blog, we break down how those priorities are playing out across supervision and what CFD brokers should be doing to stay ahead.

Balancing investor protection with growth

Regulators worldwide want retail customers to understand the risks of CFD trading. While frameworks differ - Consumer Duty (UK), Design and Distribution Obligations (Australia), and ESMA’s product governance/appropriateness rules (EU) - they all circle the same concerns: target the right customers, ensure they understand the risks, and deliver fair value.

Know your target market

The era of “anyone who can tolerate risk” is over. Brokers must be clear on who the product is for and who it is not. The FCA stresses “only targeting customers who can absorb losses.” ESMA requires firms to define and enforce a clear target market. ASIC expects a narrow, defensible target market determination (TMD). Recent ASIC reviews have criticised firms for having over-broad determinations, and failing to demonstrate “reasonable steps” to ensure product distribution is consistent with the TMD.

Test for genuine understanding

Regulators want evidence that customers grasp leverage, margin calls, short selling, as well as the generally elevated likelihood of loss. ESMA expects stronger appropriateness testing (cool-offs, rotating question sets, defensible pass marks). MAS’s Customer Knowledge Assessment applies similar pressure; firms must introduce meaningful friction for borderline clients, and allow no trading until tests are passed.

Guardrails and risk warnings

Consumers must fully understand and accept the risks they face trading CFDs. Part of this is covered by the aforementioned testing, the rest by risk warnings. This is where many firms are falling down. ESMA’s review found risk warnings missing, non-compliant, or hidden under dropdowns or in small print.

Evolving business models, new conduct risks

From fractional shares and new asset classes to gamified apps and zero-commission offers, innovation raises fresh supervisory questions. Brokers must design for younger, less experienced investors and be transparent on costs and risks.

Regulators are scrutinising social posts and influencer marketing to ensure promotions are balanced, prominent, and firm-specific.

Finfluencers

37% of US Gen Z retail investors cite influencers as a major factor in their investment decisions (IOSCO). The FCA has begun targeting unlawful promotions by ‘finfluencers’, particularly in high-risk areas like CFDs. FINRA’s penalties, exemplified by the M1 Finance case, show growing scrutiny of influencer-led marketing campaigns.

Market abuse and financial crime

CFDs give leveraged access to price-sensitive assets with fast onboarding, making them an attractive target for insiders, manipulators, and mule networks. Supervisors expect firms to spot it, stop it, and report it, and to evidence that controls work.

Where are the risks showing up?

Opaque flows (OOAAs): Obfuscated overseas aggregated accounts hide ultimate beneficial owners and can reintroduce previously off-boarded clients.
Copy and social trading: IOSCO now frames copy trading as a regulated activity. Firms must vet “signal providers,” monitor performance claims, and ensure suitability checks for copiers.
Single-stock and illiquid assets: Insider risk is highest here. Manipulation often involves “narrowing the spread,” where direct market access (DMA) orders improve the best bid/offer and are cancelled before execution, while the trader profits in the related CFD.
DMA + cross-product links: the order-book nudge happens via DMA in the underlying asset, while the profit is crystallised in CFDs, sometimes at a different venue/broker.

What are brokers finding difficult?

Our survey, conducted as part of our Global Trends in Trade Surveillance and Market Abuse report, highlights two top challenges for CFD brokers: managing false positives (23%) and integrating trade with eComms surveillance (23%). False positives sometimes spike when generic rules ignore CFD microstructure (illiquidity, spread gaps, news), lack cross-product context (CFD leg without the cash/DMA hedge), and suffer from messy data. Couple that with missing context, where firms don’t always connect CFDs to the underlying trades or link trading activity with communications data, and the noise multiplies.

The fix is less about generating extra alerts and more about generating smarter ones. That means setting thresholds that reflect instrument liquidity and client profiles, enriching scenarios with event and market context, and linking CFD trades with underlying activity and communications data. Done well, this reduces noise without blunting the firm’s ability to detect genuine abuse.

What does “good” look like?

Surveillance that proves itself: Clean data pipelines, model testing/tuning, cross-product coverage, and timely, high-quality STORs.
Risk assessment aligned to reality: Cover all asset classes and execution methods, and explicitly include behaviours like spread-narrowing.
End-to-end reporting: Reconcile trade capture through to repository acknowledgements, and investigate breaks. ESMA and ASIC are raising expectations here.
Social features under control: KYC “lead traders,” monitor correlated follower profit and loss, and switch off copying where red flags appear.

Operational resilience: what’s new, what’s specific to CFDs

Global regulators have now hardwired resilience obligations into law, with CFD brokers firmly in scope. Their heavy reliance on trading platforms, market data, and outsourced tech providers makes operational resilience especially critical.

What’s required?

Identify and map important business services. Go beyond high-level labels, breaking down trading, pricing, onboarding, and withdrawals end-to-end, linking them to the systems and people that support them. Recovery Time Objectives (RTOs) and Recovery Point Objectives (RPOs) should reflect real-world trading conditions.
Test resilience in practice. That means running scenario tests and failure simulations (e.g. data feed outages, platform downtime, cloud failure) and generating management information that demonstrates lessons learned and changes made.
Strengthen third-party oversight. Regulators expect live registers of all ICT providers, contracts that include audit and exit rights, evidence of resilience testing by vendors, and scrutiny of concentration risks (e.g., dependence on a platform provider).
Be incident-ready. Plans must deliver timely regulatory reporting, tested workarounds, and continuity arrangements that adapt as your services and vendor stack change.

The bottom line is that, for CFD brokers, resilience is now audited through your vendors as much as through you. You must prove that you can trade, reconcile, and pay out under stress, even if a key platform fails.

Our experience of working with CFD Brokers

eflow Global has delivered tried-and-tested surveillance systems for more than 25 CFD Brokers in recent years. Our team’s deep experience of working with these types of firms means that we can help CFD Brokers to join up their trade and eComms data, reduce the noise caused by false positives, and evidence outcomes, with operational resilience built in. If you’re ready to turn these themes into measurable improvements to your regulatory strategy, we’re here to help - book a consultation with the team today.