Statement on Contracts for Difference (CFDs), binary options and other speculative products

The European Securities and Markets Authority (ESMA) recently issued a warning in relation to Contracts for Difference (CFDs), binary options and other speculative products.  This warning is intended to inform retail investors about the significant risks associated with these products and the resulting investor protection concerns.  The Central Bank wishes to draw attention to this warning and highlight, in particular, that these products carry a very high level of risk.

Consumers were also advised by the Central Bank in November 2015 that they need to be fully aware of the high-risk and complex nature of CFDs before making investment decisions.  This advice followed a themed inspection of the CFD market in Ireland, during which the Central Bank identified several issues in relation to execution-only sales. It is the Central Bank’s view that CFDs are unsuitable for investors with a low-risk appetite due to the volatile nature of the CFD market, coupled with the potential for a consumer to lose more than the initial investment.

Director of Markets Supervision, Gareth Murphy stated “This is a timely and important warning from the European Securities and Markets Authority about products, such as CFDs, which are available to retail investors where there is ample evidence that the probability of loss for the consumer is very high.”