On 27 March 2018, the European Securities and Markets Authority (ESMA) agreed measures on the provision of contracts for differences (CFDs) and binary options to retail investors in the EU.
The agreed measures include:
- Binary options – a prohibition on the marketing, distribution or sale of binary options to retail investors; and
- CFDs – a restriction on the marketing, distribution or sale of CFDs to retail investors. The 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 standardised way.
In accordance with MiFIR, ESMA can only introduce temporary intervention measures on a three monthly basis. Before the end of the three months, ESMA will consider the need to extend the intervention measures for a further three months.
The FCA has also issued a statement supporting ESMA’s measures.