Following ESMA, FCA Tightens Its CFD Regulations

December 10, 2018 | AtoZ Markets – The regulator first imposed the modifications, which were described as “tough” on selling exchange-traded-contracts two years ago, which came for consumer protection purposes, as the watchdog said.

In parallel, the FCA also imposed a ban on binary options, believing that the ban saves UK customers around £17 million a year, with a tendency for restricting trading to cash only, as the regulator noted earlier this year. 

As the financial watchdog announced earlier, it will review the CFD contracts based on cryptocurrency in the firs quarter of the next year.

Financial analysts read that the FCA is following ESMA in its policy against CFD and binary options, where the latter was reported to have renewed its ban more than one time, while keeping its grip on CFD firmer.

Financial regulators seem to identify CFDs as harmful!

The EU regulator published recently a notice, in which it said it fell under Article 40 of Regulation (EU) No 600/2014 “to prohibit the marketing, distribution or sale of binary options to retail clients, which ESMA adopted on the 21st of September this year”.

On its website, ESMA referred to that “The new warning will be allowed only in cases where the standard terms of a third party marketing provider have a character limit which is lower than the number of characters comprising the full or the abbreviated risk warning, provided that the advertisement also links to a webpage of the provider on which the full risk warning is disclosed.”.

The Cyprus Securities and Exchange Commission (CySEC), in its turn, had also raised its accent warning against CFDs, where the former said that “trading on virtual currencies or on contracts for difference (CFDs) relating to virtual currencies is not suitable for all investors.”

The regulator drew the public attention that the market lacks the regulations and guidelines needed for guaranteeing that consumers and investors are in the safe margin trading in CFDs, noting to that not following its warning might result in losing the invested capital.

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