Partially upheld: Investment mis-selling complaint against CMC Markets UK plc

Decision detail

Summary

Mr M complained about CMC Markets' decision to change how it priced his oil CFDs in April 2020, when the market experienced unprecedented negative pricing. CMC switched from pricing based on the nearest liquid May 2020 futures contract to the December 2020 contract, resulting in significantly higher holding charges (rising to over 225%). Mr M's positions were subsequently closed due to insufficient margin. The ombudsman found that while CMC's pricing changes were fair and reasonable given the exceptional market volatility and were permitted by the account terms, the initial notification on 21 April 2020 lacked sufficient detail. However, after receiving full explanation on 23 April 2020, Mr M had adequate information to decide whether to close his positions, and losses incurred thereafter were trading losses he chose to accept by continuing to hold. Compensation was awarded only for the period 21-23 April 2020 plus £200 for trouble and upset.

The Ombudsman's reasoning

The ombudsman found that CMC's terms gave it wide discretion to change pricing methods, and that the exceptional market circumstances (negative oil pricing and volatility) made the pricing change fair and reasonable. The key issue was whether Mr M had sufficient information to make an informed decision. The ombudsman agreed that the 21 April 2020 email was insufficiently detailed, but the 23 April 2020 email provided full explanation. From 23 April onwards, Mr M had enough information to decide whether to close his positions, and by keeping them open he accepted the changes. Losses after 23 April were trading losses Mr M chose to take. The comparison of closure price to underlying market price was irrelevant because Mr M was trading on CMC's quoted price, not the underlying market price.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website