Football enthusiasts can now trade football-based contracts for difference (CFDs), turning passion into profit, but what are the regulatory implications for brokers offering these products to their clients?
Are football player CFDs reportable?
Like cryptocurrency CFDs, football player CFDs aren’t currently regulated by ESMA or the UK’s FCA as the underlying asset is not a financial product. The football player CFDs are generally a derivative of an index calculated by AllStars Traders. Hence, these products are not reportable.
The generation of more robust regulatory frameworks to support the reporting of derivatives on non-financial instruments isn’t out the realms of possibility for the future. We are already seeing regulators across numerous jurisdictions conduct consultations on how to approach cryptocurrency products given their new and dynamic nature. ISDA also recently published a paper on Developing Contractual Standards for Crypto Derivatives.
What CFDs are reportable anyway?
Under EMIR/UK EMIR:
All derivatives (CFDs are in this category) of a financial instrument such as FX, interest rates instruments, equities or commodities must be reported to a designated trade repository (TR) under both EMIR and UK EMIR.
Under MiFIR/UK MiFIR:
The financial instrument or the underlying must be traded on a trading venue (ToTV) within the EEA to fall within scope of MiFIR reporting obligations. To be reportable under UK MiFIR, the instrument or the underlying must be traded on a UK, Gibraltar or EU trading venue.
How do football player CFDs work?
AllStars Trader has introduced sports stocks in the format of a CFD based on an underlying Adrix player index. The Adrix index processes millions of data points across players, matches and leagues in real-time, generating an individual index for each player. This individual index allows each player to be benchmarked against their peer group and a relative measure of value is created accordingly.
If you would like to discuss any of the above, please get in touch with us.