FSA forces Global Trader to shut up shop

Global Trader, the online spread trading company, has been forced to close its doors to new business after intervention from the Financial Services Authority.

The move followed heavy losses sustained by clients trading equity derivatives in Artilium, an Aim-listed telecommunications technology group popular with retail investors.

Artilium shares have plunged in the last few months in spite of a lack of news flow in the company. From a peak in October, the stock has dropped 86 per cent, leaving the company valued at just £30m.

Global Trader is a specialist in spread betting and contracts-for-difference (CFD), a type of equity derivative that allows investors to gain exposure to a share, often with a relatively small down payment. The company confirmed last night that it had applied for a ‘variation of permission’, the official method by which companies change the terms of their authorisation.

It is understood the FSA requested the move, which means Global Trader will no longer be permitted to carry out regulated activities except to close existing trades. The regulator would have had authority to force through the variation of permissions if it had wished.

Global Trader said: ‘Throughout the process, we have been communicating to our clients and taking every permissible action to protect the value of their investments.’

A full statement is expected to be issued today to the Johannesburg Stock Exchange, where Global Trader’s parent company Purple Capital is listed. According to its website, Global Trader conducts more than 600,000 trades a year, worth in excess of $10bn per annum.

The group has offices in London, Johannesburg, Cape Town, Toronto and Bangkok and a presence in Singapore, Moscow and Vancouver.

Until recently, Global Trader was run by Fleur Gremmen, a former JPMorgan investment banker who helped found the business in 2000. The company was bought last year by Purple Capital, a South Africa-based financial services group headed by Mark Barnes, executive chairman. Purple Capital owns stakes in a host of South African companies including Integer, Blackstar Investors, African Independent Finance and Spanjaard.

CFDs have been at the forefront of the booming equity derivatives market because they are highly liquid and often more tax-efficient.

Tags: Financial Services Authority, Global Trader, spread betting

This entry was posted on Saturday, February 16th, 2008 at 1:15 am and is filed under Industry Happenings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.