ESMA adopts final product intervention measures on CFDs and binary options

On 1st June 2018, the European Securities and Markets Authority (ESMA) formally adopted new measures on the provision of contracts for differences (CFDs) and binary options to retail investors.

The measures have been published in the Official Journal of the European Union (OJ) today. They will start to apply from 2 July 2018 for binary options and from 1 August 2018 for CFDs and will apply as follows:

1.    Binary Options (from 2 July 2018) - a prohibition on the marketing, distribution or sale of binary options to retail investors; and
2.    Contracts for Differences (from 1 August 2018) - a restriction on the marketing, distribution or sale of CFDs to retail investors. This 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.

ESMA has adopted these measures in the official languages of the EU and they will remain in force for a period of three months from the date of application.

Next steps
MiFIR gives ESMA the power to introduce temporary intervention measures on a three monthly basis. Before the end of the three months, ESMA will review the product intervention measures and consider the need to extend them for a further three months.