ESMA Adopts Product Intervention Measures on CFDs and Binary Options
ESMA formally adopted new measures on the provision of contracts for differences (CFDs) and binary options to retail investors. The measures have been published in the Official Journal of the European Union and will start to apply from August 01, 2018 for CFDs and from July 02, 2018 for binary options. ESMA adopted these measures in the official languages of EU and they will remain in force for a period of three months from the date of application.
The measures on CFDs involve restriction on the marketing, distribution, or sale of CFDs to retail investors. This restriction consists of leverage limits on opening positions, a margin close-out rule on a per account basis, a negative balance protection on a per account basis, preventing the use of incentives by a CFD provider, and a firm-specific risk warning delivered in a standardized way. The measures on binary options involve prohibition of the marketing, distribution, or sale of binary options to retail investors. MiFIR gives ESMA the power to introduce temporary intervention measures on a three monthly basis. Before the end of the three months, ESMA will review the product intervention measures and consider the need to extend them for a further three months.
ESMA also published questions and answers (Q&A) on the temporary product intervention measures on the marketing, distribution, or sale of CFDs and binary options to retail clients, based on Article 40 of the Markets in Financial Instruments Regulation (MiFIR or Regulation (EU) No 600/2014). The Q&A provides answers to practical questions in relation to the existing contracts, payments, margin close-out protection, aggregate liability, monetary benefits, binary options, CFDs referencing futures, and guaranteed stop-loss orders. Additionally, EIOPA published a statement on consumer detriment resulting from policyholder exposure to CFDs and binary options. Considering the potential future risks to policyholders, EIOPA expects insurance undertakings to avoid as possible direct underlyings of insurance-based investment products, the instruments for which ESMA has issued a ban or restriction. In addition, ESMA published Q&A
Related Links
- ESMA Press Release
- Regulation on CFDs
- Regulation on Binary Options
- Decisions in EU Languages
- ESMA Q&A
- EIOPA News Release
- EIOPA Statement (PDF)
Effective Date: August 01, 2018 (3 months for CFDs); July 02, 2018 (3 months for binary options)
Keywords: Europe, EU, Securities, Insurance, Temporary Intervention Measures, CFDs, Binary Options, Q&A, MiFIR, EIOPA, ESMA
Previous Article
SARB Paper on Methodology to Identify Systemically Important BanksRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
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.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
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.
