Contracts for difference were notorious before Anglo Irish Bank

The secret behind the success of CFDs here 10 years ago was that they generated obscene profits for Irish brokers — eclipsing the margins they earned at the time from their traditional private client business and their dealings in Irish shares.

The first public sign that CFDs could cause big trouble came during one Monday in 2005 when shares in Elan collapsed. But despite investors holding positions in Elan through CFDs suffering an estimated €50m in losses, CFD business continued as normal.

Brokers and investment firms in Ireland were retailers of CFD products for large investment houses in London. The warning of 2015 was ignored by investors and regulators alike.

The following year, in 2006, an almighty row broke out when in March the Revenue Commissioners responded to a query about a tax treatment from a Dublin broker. Revenue gave guidance that tax-free CFDs should be taxed at the 1% rate that applied to traditional share purchases. Underlining the importance of CFDs to their profits, the Dublin brokers kicked up a storm.

Within days, the government had pledged to amend the Finance Bill to maintain the tax-free status of CFD trading. The Dublin stock market was, for its size, among one of the most “turned over” or dependent on CFD trading in the world. The full disaster arrived when Seán Quinn used CFDs to bet the house on a single share, Anglo.

Anglo had lent huge sums into an over-inflated Irish property market but its position was made more precarious by Quinn’s CFD positions .

The failing of the old regulatory regime means the Central Bank cannot countenance any slack control over CFDs again.