ESMA hints at its powers being limited at national level

Maria Nikolova

A national regulator may actually take action contrary to an opinion adopted by ESMA.

The European Securities and Markets Authority (ESMA) has earlier today published its latest newsletter, dedicating a heavy part of it to a set of positive opinions it has recently issued about product intervention measures by a number of national competent authorities (NCAs).

These positive opinions concerned the measures related to the offering of binary options and CFDs in Poland, the UK and the Netherlands.

Today’s newsletter by ESMA pretty much restates what is already said about these measures and ESMA’s opinion – which is supportive. One thing should be noted though – ESMA makes a brief remark regarding the cases where its opinion on the product intervention measures adopted by NCAs is negative.

“If ESMA concludes that a proposed national product intervention measure is not justified or proportionate it will say in its opinion. If an NCA proposes to take, or takes, action contrary to an opinion adopted by ESMA, the NCA shall immediately publish on its website a notice fully explaining its reasons for so doing”.

This statement is pretty startling. Basically, it may be interpreted as saying that the worst thing that may happen to an NCA which decides to introduce measures regarding binaries and/or CFDs that are not welcome by ESMA is to be scolded via a negative opinion. Then, the national regulator simply has to publish a text explaining why it decided to introduce measures that are not supported by ESMA. And that is it.

Put otherwise, ESMA has limited powers when deciding on product intervention measures at a national level. It may well be the case then, that certain nations that are willing to support their online trading industries may chose to discard the restrictions introduced by ESMA.

Only time will tell, of course. At present, there are temporary measures in place that prohibit the sale and marketing of binary options across the EU and certain restrictions on the offering of CFDs to retail investors (for instance, there is a ban on a raft of incentives and there are caps on leverage).

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