KNF Keeps CFD Review Open as XTB Shares Fall Nearly 7%

Polish regulator KNF confirmed on Monday that its review of how contracts for difference (CFDs) are marketed and sold is still in progress, but it again declined to set a timetable or outline potential restrictions. The watchdog's communications director, Jacek Barszczewski, told Polish financial outlet Strefa Inwestorów that "work in this area continues" and that conclusions will be announced once the review is complete.

The review first came to light in May, when KNF Chairman Dariusz Adamski said the regulator was examining how domestic and cross-border firms offer CFDs, including how they assess clients' knowledge, experience and risk understanding. Adamski argued at the time that access to complex, high-risk instruments was too easy and should be limited for investors who do not understand the risks. No consultation paper, draft rules or implementation date have been published since.

The regulatory scrutiny has direct revenue implications for XTB, Poland's largest listed broker. CEO Omar Arnaout said in February that CFDs generate about 95% of revenue or more, though the company wants to cut that share to roughly 70% by expanding into products such as spot crypto and equities.

Fine and Market Reaction

The review follows a PLN 20 million (around $5.5 million) penalty that KNF imposed on XTB in March over shortcomings in client knowledge assessments, target-market controls and risk disclosures for conduct spanning parts of 2022 and 2023. The regulator also objected to a list highlighting high-performing clients, saying it could give a misleading view of CFD risk and that commercial relationships with people on the list created conflicts of interest. XTB has asked for reconsideration, so the fine is not yet final.

Investor sentiment has turned against the broker this week. XTB shares closed 4.1% lower at PLN 169.18 on Monday and traded at PLN 164.56 by late morning Tuesday, down another 2.7% and nearly 7% below Friday's close. The WIG20 index fell only 1.1% on Monday and 0.4% by Tuesday's snapshot, leaving XTB roughly 5.2 percentage points behind its benchmark over the two sessions.

The decline did not spread across the European brokerage sector. Plus500 gained 1.0%, IG Group rose 0.8%, CMC Markets advanced 4.4% and Swissquote added 1.0% on Monday. Analysts noted there is no direct evidence that Barszczewski's comment triggered the selloff, and XTB had climbed 61.6% between July 1 and its August 12 close, leaving room for profit-taking.

KNF has not said which measures it is considering, though Strefa Inwestorów reported that Spain's restrictions are among the options being examined. Spain's CNMV adopted a broader retail distribution regime in 2023 that restricts mass advertising, sponsorships, sales calls, free training, certain CFD marketing incentives and credit-card funding for these products. Those rules go beyond existing EU leverage caps, margin close-out requirements, negative balance protection and standard risk warnings. ESMA also reminded firms this year that some perpetual futures fall under CFD restrictions. For now, KNF has neither proposed Spain's model nor set a date for concluding its review.