Breaking: ESMA Implies Inspecting Brokers' Pro Clients Practice
- The ESMA is signaling vigilance over professional clients and third-country branches

The European Securities Markets Authority (ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term) published an announcement confirming that the pan-European regulator is extending the validity of CFDs restrictions. The news comes as no surprise after the FCA made the temporary restriction permanent.
Only national regulators have the power to transform the measure into a permanent one. So far only the FCA and Bafin have been actively communicating with retail brokers about their intentions.
The new extension is valid for three months since February 1, 2019. The next extension is scheduled for the second half of April and should become effective from May 1, 2019.
What is more interesting is in the rationale behind the decision. The ESMA is closely watching brokers as we found out after exclusively reporting on a dataset which the UK FCA demanded from brokers. Some companies are implied to have violated the restriction on suggesting to customers a reclassification to professional status.
Professional Clients & Offshore Subsidiaries

A section in ESMA's restriction extension that highlights some details
National regulators reported to the ESMA an increase in the number of clients treated as professional clients. The figures were substantially higher when compared to a year ago.
“ESMA is aware that some CFD providers are advertising to retail clients the possibility of becoming professional clients on request,” the EU regulator’s decision states.
The watchdog elaborates that only a customer may request to be treated as a professional client. The ESMA highlights that it is aware that some brokers have been advertising “professional clients” solicitations.
According to the EU regulator, brokers should ensure that they comply at all times with all applicable legislative requirements.
“ESMA is also aware that some third-country firms are actively approaching Union clients or that some CFD providers in the Union are marketing the possibility for retail clients to move their accounts to an intra-group third-country entity,” the document continues.
According to the regulations, third-country firms are allowed to offer services to EU clients explicitly on their own request. The ESMA appears to be signaling that it might have encountered irregularities on part of brokers.
Finally, the ESMA is aware that firms are starting to provide other speculative investment products. ESMA will continue to monitor the offer of these other products to determine whether any other Union measures are appropriate.
Client Costs Decline
Outside of balance losses, clients have paid significantly lower amounts to their brokers over the first three months of the ESMA CFDs limitation. As the regulator states in its decision, retail clients incurred “significantly lower” costs for trading CFDs.
“Average costs in respect of active retail accounts containing CFDs on Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term fell disproportionately in comparison to others, though such accounts continued to incur higher costs than accounts with no cryptocurrency exposure,” the ESMA elaborates.
In addition, national regulators are reporting a sustained decrease in the number of automatic close-outs, as well as the number of times accounts, went into negative equity and the size of negative equity balances.
Profitability Unchanged
The ESMA is providing a detailed explanation behind its rationale to extend the temporary measures once more. National regulators have reported that only minor violations of the new regime have been observed since its implementation in August 2018.
According to the discussions at a regulatory level, the number of retail clients, trading volumes and client equity declined significantly. Moreover, the regulators didn’t observe any changes to levels of profitability over the three month period until October 2018 when compared to the same three months in the previous year.
The European Securities Markets Authority (ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term) published an announcement confirming that the pan-European regulator is extending the validity of CFDs restrictions. The news comes as no surprise after the FCA made the temporary restriction permanent.
Only national regulators have the power to transform the measure into a permanent one. So far only the FCA and Bafin have been actively communicating with retail brokers about their intentions.
The new extension is valid for three months since February 1, 2019. The next extension is scheduled for the second half of April and should become effective from May 1, 2019.
What is more interesting is in the rationale behind the decision. The ESMA is closely watching brokers as we found out after exclusively reporting on a dataset which the UK FCA demanded from brokers. Some companies are implied to have violated the restriction on suggesting to customers a reclassification to professional status.
Professional Clients & Offshore Subsidiaries

A section in ESMA's restriction extension that highlights some details
National regulators reported to the ESMA an increase in the number of clients treated as professional clients. The figures were substantially higher when compared to a year ago.
“ESMA is aware that some CFD providers are advertising to retail clients the possibility of becoming professional clients on request,” the EU regulator’s decision states.
The watchdog elaborates that only a customer may request to be treated as a professional client. The ESMA highlights that it is aware that some brokers have been advertising “professional clients” solicitations.
According to the EU regulator, brokers should ensure that they comply at all times with all applicable legislative requirements.
“ESMA is also aware that some third-country firms are actively approaching Union clients or that some CFD providers in the Union are marketing the possibility for retail clients to move their accounts to an intra-group third-country entity,” the document continues.
According to the regulations, third-country firms are allowed to offer services to EU clients explicitly on their own request. The ESMA appears to be signaling that it might have encountered irregularities on part of brokers.
Finally, the ESMA is aware that firms are starting to provide other speculative investment products. ESMA will continue to monitor the offer of these other products to determine whether any other Union measures are appropriate.
Client Costs Decline
Outside of balance losses, clients have paid significantly lower amounts to their brokers over the first three months of the ESMA CFDs limitation. As the regulator states in its decision, retail clients incurred “significantly lower” costs for trading CFDs.
“Average costs in respect of active retail accounts containing CFDs on Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term fell disproportionately in comparison to others, though such accounts continued to incur higher costs than accounts with no cryptocurrency exposure,” the ESMA elaborates.
In addition, national regulators are reporting a sustained decrease in the number of automatic close-outs, as well as the number of times accounts, went into negative equity and the size of negative equity balances.
Profitability Unchanged
The ESMA is providing a detailed explanation behind its rationale to extend the temporary measures once more. National regulators have reported that only minor violations of the new regime have been observed since its implementation in August 2018.
According to the discussions at a regulatory level, the number of retail clients, trading volumes and client equity declined significantly. Moreover, the regulators didn’t observe any changes to levels of profitability over the three month period until October 2018 when compared to the same three months in the previous year.