ESMA supports Norwegian restrictions on offering of CFDs

Maria Nikolova

The product intervention measures that come into effect in Norway today are the same as those introduced by ESMA at an EU level.

The European Securities and Markets Authority (ESMA) has voiced its support for the product intervention measures introduced by by the financial regulator (Finanstilsynet) of Norway. These measures restrict the offering of CFDs to retail investors and ban the offering of binary options to retail investors.

The Finanstilsynet has notified ESMA that the national measures regarding CFDs are the same as ESMA’s measures at national level. The national measures are expected to take effect on February 3, 2020.

Regarding binary options, the national measure consists of a permanent prohibition on the marketing, distribution or sale of binary options to retail clients in or from Norway. This means that the national measure is the same as ESMA’s measure at national level. The national measure is expected to take effect on February 3, 2020.

ESMA’s opinion concludes that the proposed measures are justified and proportionate. ESMA’s qualifies this conclusion in relation to the application of the measures in the case of cross-border activities.

ESMA and the national competent authorities do not always agree on the product intervention measures. For instance, the pan-EU watchdog had such a disagreement with the UK Financial Conduct Authority (FCA). ESMA’s opinion concluded that overall the FCA’s proposed national measures are justified and proportionate, with the exception for its decision to:

  • Not apply our sales and distribution restrictions to CFD-like option providers authorised in other EEA Member States other than a UK branch or tied agent.
  • Setting leverage limits for CFDs referencing certain government bonds to 30:1 (compared to 5:1 under ESMA’s measures).

Let’s note that ESMA has criticized Poland, as the national product intervention measures in Poland enabled a new category of experienced clients to have lower initial margin requirements for two of the five types of underlying in ESMA’s measures (lower margin requirements for experienced clients).

No sanctions other than simple statements of disagreement followed for the UK and Poland.

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