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ESMA consults on measures for binary options and certain CFDs

Consultation

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The European Securities and Markets Authority (ESMA) has published a consultation paper with measures to protect retail investors against high-risk investments such as binary options and certain CFDs. The consultation started on 18 January 2018 and will close on 5 February 2018.

The Dutch Authority for the Financial Markets (AFM) has issued several warnings regarding the risks of binary options and certain CFDs. Merel van Vroonhoven, chair of the AFM, led the preparations for these protective measures within the European Union in her role as chair of the Investor Protection and Intermediaries Standing Committee (IPISC).

Importance of a European approach

The introduction of the revised Markets in Financial Instruments Directive (MIFID II) on 3 January 2018 has given European supervisors the option of product intervention.

Merel van Vroonhoven believes this possibility for ESMA within the European Union represents huge progress. “The aggressive practices of some providers mean that a pan-European approach to the prohibition and restriction of high-risk investments is essential. Many of these providers are not transparent and employ irresponsible cross-border marketing techniques to manipulate the sentiments of retail investors. Many investors lose their investment and experience serious problems as a result. We can only stop this if we cooperate at European level.”

Product intervention for high-risk investments

Market parties and other stakeholders have the opportunity to respond to ESMA’s proposed measures. The proposed product intervention will focus initially on a ban on the marketing, distribution and sale of binary options and restricting the marketing, distribution and sale of certain CFDs to retail investors.

There will also be a study to establish whether a similar product intervention should be in place on CFDs on cryptocurrency that have increased in popularity, or whether a lower leverage limit should be imposed.

The consultation will close on 5 February 2018. Based on the outcome of the call for evidence, ESMA can use its product intervention powers at European level, in any case for a period of three months with an option to extend. Member States will then be able to adopt these measures in their national legislation.

More information on the consultation process is available on the ESMA website.

Journalists may contact Nicole Reijnen, AFM Press Officer, on 0031 (0)6-2564 3043 or at nicole.reijnen@afm.nl.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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