ESMA agrees with UK, Dutch and Polish restrictions on CFDs, binaries

Maria Nikolova

The pan-EU regulator finds that the proposed measures are justified and proportionate.

MiFID II implementation likely to be set back even further

As FinanceFeeds has reported, a number of European countries have acted to implement investor protection measures analogical to those introduced by the European Securities and Markets Authority (ESMA) with regards to the offering of CFDs and binary options to retail clients.

Among the goals of such measures is to protect investors at a national level, once the temporary measures introduced by ESMA expire and the EU regulator stops renewing them.

Earlier today, ESMA published its positive opinion on the national product intervention measures introduced by three countries – Poland, the UK and the Netherlands.

ESMA’s opinion finds that the proposed measures are justified and proportionate and that it is necessary for national regulators to take product intervention measures that are at least as stringent as ESMA’s measures.

ESMA’s has issued opinions on national product intervention measures from:

  • Authority for the Financial Markets of the Netherlands (AFM) – Opinion on the proposed product intervention measure relating to binary options;
  • Authority for the Financial Markets of the Netherlands (AFM) – Opinion on the proposed product intervention measures relating to contracts for differences;
  • Komisja Nadzoru Finansowego of Poland (KNF) – Opinion on the proposed product intervention measure relating to binary options; and
  • Financial Conduct Authority of the United Kingdom (FCA) – Opinion on the proposed product intervention measure relating to binary options.

The UK ban on binary options comes into effect today. Importantly, it is also applying to so-called ‘securitised binary options’ that were excluded from ESMA’s prohibition. Securitised binary options are not currently sold in or from the UK. The FCA thinks these products pose the same risks for investors and so is extending the scope of the prohibition to prevent a market developing for these products.

The FCA estimates the permanent ban on binary options could save retail consumers up to £17 million per year, and may reduce the risk of fraud by unauthorised entities claiming to offer these products.

In its opinion about the UK measures, ESMA says it has assessed the relevance of the FCA’s supervisory experience, in particular the likelihood of circumvention of the exclusion by UK product providers, as well as the particular position of UK clients which historically traded binary options as gambling products and have experienced significant losses. ESMA considers that the specificities of the national market together with the inherent complexity of the product justifies a stricter treatment in the national measure.

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