March 1, 2019, | AtoZ Markets – The UK Financial Conduct Authority (FCA) posted a statement on its website concerning the onshoring of the European Securities and Markets Authority’s (ESMA) temporary binary options prohibitions and difference products (CFDs) restrictions.
ESMA restrictions remains part of the UK law for now
The British financial authority reported that the aforementioned measures initiated by ESMA will remain part of the UK domestic law on the day of Brexit as part of the EU (Withdrawal) Act. The British firms, as the FCA statement outlined, are required to comply with ESMA measures until their expiration in April 2019.
FCA is getting reading for different Brexit scenarios
The regulator continues to prepare for a number of UK withdrawal from EU scenarios. This includes an agreement under which the UK leaves the EU on March 29, 2019, without concluding an exit agreement and an implementation period between the UK and EU governments. The ESMA decision notes that the resumption of a temporary restriction on marketing, distributing or selling CFD to retail customers and a temporary ban on the sale, distribution or sale of binary options to retail customers will become part of UK law if the EU law ceases to apply in the UK on March 29, 2019. Therefore, firms are required to comply with ESMA notifications of decisions before their expiration date of April 1, 2019, for binary options and April 30, 2019, for CFDs. The FCA oversight of firms in this sector will continue to focus on adhering to the ESMA interim intervention measures.
UK financial authority announced about its plans a year ago
In December 2018, the FCA published two consultative documents (CPs) to make permanent ESMA intervention measures in the UK permanent. The proposed FCA interventions are essentially the same as those of the ESMA, although the UK regulator also suggests applying its rules to products that can be replaced. FCA plans to decide on the final rules in order to be able to publish the Policy Statement and any final Handbook rules in March 2019 for binary options and in April 2019 for CFD and CFD-like options. FCA expects its final rules to be applied shortly after publication to coincide with the expiration dates of the ESMA restrictions.
If for any reason the ARC cannot complete its internal approach before the existing ESMA interventions cease to operate in the UK, it will consider taking temporary interventions to intervene in the product to repeat the actions of ESMA. This will ensure that there is no loss of protection for British consumers between the termination of ESMA in the UK and the completion of its internal regulation.
Chief Digital Officer of 7marketz Group Mihai Milea gave his comments regarding the common FCA and ESMA initiative:
“ESMA's renewal of the ban on Binary Options comes at no surprise given their position to reduce clients' risk. In general, regulators' interventions tend to destabilize the financial services industry. For example, you can see the effects of imposing leverage limits on CFDs, which has to lead to masses of traders leaving the EU for external jurisdictions, regulated, or not. However, Binary Options are considered to be closer to gambling than they are to trading and as a result, banning them can be beneficial for the financial services industry as a whole"