EU Regulator ESMA Updates Q&A on Temporary Product Intervention Measures


EU Regulator ESMA updates Q&A on temporary product intervention measures, thus clarifying the operations that are related to the clients located outside the EU as well as to the non-EU nationals. 

12 July, AtoZ Markets The key European regulator of the financial markets, the European Securities and Markets Authority (ESMA) has announced that is has made updates to its Questions and Answers document. This time, the update is addressing the temporary limitations on Binary Options and CFD for brokers. 

EU Regulator ESMA Updates Q&A on Temporary Product Intervention Measures

As per the official document released by the ESMA, both the binary and CFD decisions that are related to the MiFID and MiFID II are applicable to investment firms or credit institutions that are registered in the EU. This is regardless of the location or nationality of their clients. 

At the beginning of January, the EU markets have seen the enactment of the new regulatory framework for financial institutions. Following the implementation, the regulator has imposed some of the regulatory limitations on the marketing, distribution or sale of CFDs and binary options for brokers. 

The recently published Q&A document looks into these measures in order to clarify operations that are related to the clients located outside the EU as well as to the non-EU nationals. 

ESMA Binary Options Ban

The ESMA plans to promote a common approach to its temporary measures that have been put into effect earlier this May. Back then, the EU watchdog has moved to limit the options for leverage for retail brokers across the bloc.

The decision of the European regulator constitutes the ban on marketing, distribution, and sale of the Binary Options. The regulator also made a decision to introduce tiered leverage for various financial instruments. In fact, any Contracts for Differences (CFDs) were required to meet strict requirements and were temporarily limited to a set of regulatory rules.

According to the regulatory statement from ESMA, CFDs products were facing a restriction on the marketing, distribution, and sale to retail investors.

Following on this, the ESMA has introduced a tiered leverage in several tiers. The EU supervisor decided to set out 30:1 leverage for CFDs on major Forex pairs, with non-major currency pairs and gold to be traded at 20:1, while other commodities and non-major indices will be given a 10:1 gearing. Likewise, ESMA laid out a 5:1 leverage for individual equities and 2:1 leverage for cryptocurrency trading.

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