CySEC reiterates consultation on ESMA CFD trading restrictions


Following the initial call for evidence for Binary Options and CFDs Measures from the key European regulator from last week, CySEC reiterates consultation on ESMA CFD trading restrictions.

23 January, AtoZForex The key financial regulator of Cyprus, the Cyprus Securities and Exchange Commission (CySEC) has informed the markets about its intention to draw the attention of the Cyprus Investment Firms (CIFs) to the latest publication from the European Securities and Markets Authority (ESMA).

 CySEC reiterates consultation on ESMA CFD trading restrictions

Earlier last week, the primary regulatory body of the EU markets has published a call for evidence for potential product intervention measures. The watchdog was looking into the provision of contracts for differences and binary options to retail clients.

Considering the launch of the new set of the united financial regulations across the European markets, MiFID II, the regulator puts its best efforts to ensure the full compliance level.

The CySEC has reiterated that ESMA invited investment firms that are involved in the sale, promotion or marketing of CFDs and Binary Options to submit their comments by 5th February 2018. The regulator also stated that ESMA is considering taking measures to mitigate risks that are associated with these products.

The CySEC further states that ESMA is considering the following measures:

1. ban on the marketing, distribution or sale of binary options to retail clients; and

2. limiting the marketing, distribution or sale of CFDs, including rolling spot forex, to retail clients.

 CySEC Highlights ESMA CFDs restriction measures

The Cypriot regulator has also highlighted that the ESMA considers the following restrictions on the CFDs:

  1. leverage limits on the opening of a position between 30:1 and 5:1, whose limit will vary according to the volatility of the underlying asset;
  2.  a margin close-out rule;
  3. negative balance protection to provide a guaranteed limit on client losses;
  4. a restriction on benefits incentivising trading;
  5. a standardised risk warning.

With this announcement, CySEC reminds all the CIFs that provide investment services in CFDs, binary options and other speculative investment products that the proposed measures include those that have already been taken by CySEC.

Therefore, the regulator notes that any national measure will stay valid until further notice or until a specific ESMA measure supersedes a national one. The CySEC also outlines all the measures that are taken or proposed by the regulator in its official announcement.

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