French AMF Proposes to Permanently Introduce ESMA Measures

The French regulator is aiming to reduce its reliance on temporary product intervention measures

The French financial regular, Autorité des Marchés Financiers (AMF) is preparing to introduce additional measures to curtain the marketing of binary options and CFDs. The country has been one of the most-proactive when it comes to limiting the industry and is committed to solving its problems with the above-mentioned products with a more permanent policy.

As per European regulations, national regulators can choose to implement product intervention powers on a local level, country by country. The AMF is following up on the steps of the UK’s FCA and BaFin, which late last year adopted measures tailored to their specific markets. 

The AMF is proposing a permanent ban on binary options and a restriction on the marketing of CFDs with trading conditions different to what we are already familiar with: 1:30 leverage, 50 percent stop out and negative balance protection.

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In addition, the AMF is aiming to prohibit CFD providers to encourage the public to invest in their products and mandates firms to display adequate risk warnings. The regulator is looking for feedback from industry participants on the proposed national level intervention.

EU Retail Broker Industry Changes

After binary options were prohibited since the 2nd of July 2012 and CFDs brokers greatly limited their product offerings to retail clients, the changes to the European brokerage industry have been significant.

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Brokers from outside of the EU, have started targeting European clients via a variety of methods, last but not least cold-calling. Changes mandated by the ESMA have yielded a much more constrained marketing environment and client acquisition costs for brokers increased.

In the meantime brokers who are making the market themselves have divested with offshore subsidiaries, as the EU industry is seen transitioning into an STP model of operation.

Endless ESMA Renewals

The ESMA already renewed its product intervention measures against binaries on three separate occasions, leading to the current end date of July 1, 2019. The supranational European regulator also imposed restrictions on the marketing of financial contracts with differential payment (CFD) since August 1, 2018, which have already been extended twice.

After several years of debates about products acceptable to retail clients, the AMF is committed to denounce the complex and risky nature of binaries and CFDs and limit the risks for retail investors.

Just as is in the case of the EU regulation, the proposed measures are being discussed only for non-professional clients.

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