The UK Financial Conduct Authority (FCA) has outlined in a statement that it is delaying the implementation of new rules on forex and CFDs trading. The news follows the European Securities and Markets Authority (ESMA) publishing a brief statement on forex, CFDs and binary options brokers, explaining that it is concerned about the effectiveness of the current regulatory framework.
The news brings a small sigh of relief to the financial industry, as the UK FCA had previously aimed to introduce the new regulations before the end of June. The regulator has now decided to skip immediate measures, as the central European supervisory authority looks into the matter.
The EU supranational regulatory authority however is looking into using its new product intervention powers, which allow it to ban certain products for a period of 12 months. A review of any ban should be reviewed every three months.
The deadline given by ESMA for the announcement of new rules and regulations over retail brokers is the implementation of MiFID II. The biggest change expected from the regulatory framework is the ‘product intervention power’, whereby ESMA will be allowed to ban certain products and more effectively supervise the industry.
MiFID II and Product Intervention Powers
According to the FCA, the measures in discussion at ESMA are similar to the UK watchdog’s own proposals, that included a cap on leverage and a ban of bonus promotions. Certain changes to client on-boarding procedures are also in the mix as the FCA is looking to protect clients from taking uninformed risks.
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Beyond the measures outlined by the FCA, ESMA is considering the introduction of mandated negative balance protection measures, a step which the German regulator has already implemented.
Should a decision to use product intervention powers be taken by ESMA it will also need to be approved by ESMA’s Board of Supervisors.
The FCA highlights that it is contemplating taking final measures in the first half of 2018.
It outlined in a statement: “As we monitor the progress of ESMA’s product intervention process, the FCA will conduct further policy work in light of consultation feedback. We expect this to include a further request for additional data from a sample of UK firms over the coming months. Information received during the consultation period suggests that lower leverage is associated with better client outcomes across a number of firms.”
“More detailed and comparable firm data are required to provide clarity on the impact of different factors on individual client outcomes. These data and analysis are intended to inform any future policy decisions, and provide a basis on which we can evaluate the impact of any prospective rules. The FCA will continue its focus on the sector through its on-going programme of supervisory work,” the UK regulator concludes.