ESMA Consults on Contracts for Differences and Binary Options Measures
ESMA published a call for evidence on potential product intervention measures related to the provision of contracts for differences (CFDs), including rolling spot forex and binary options to retail investors. The submission period for responses will close on February 05, 2018.
ESMA published a statement on December 15, 2017, explaining that it was considering the possible use of its product intervention powers under Article 40 of Markets in Financial Instruments Regulation to address investor protection concerns posed by the marketing, distribution, and sale of CFDs and binary options to retail investors. It is now seeking evidence from stakeholders on the impact of the proposed measures related to CFDs and binary options. ESMA is also considering whether CFDs in crypto currencies should be addressed in the measures. The potential measures under consideration are as follows:
- Leverage limits on the opening of a position by a retail client. These would range from 30:1 to 5:1 to reflect the historical price behavior of different classes of underlying assets.
- A margin close out rule on a position by position basis. This would standardize the percentage of margin at which providers are required to close out a retail client’s open CFD.
- Negative balance protection on a per account basis. This would provide an overall guaranteed limit on retail client losses
- A restriction on the incentivization of trading provided by a CFD provider.
- A standardized risk warning by CFD providers. This would include an indication of the range of losses on retail investor accounts.
- Prohibition on the marketing, distribution, or sale of binary options to retail investors.
Related Links
Comment Due Date: February 05, 2018
Keywords: Europe, EU, Securities, MiFIR, CFDs, Binary Options, Investor Protection, ESMA
Related Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards