Following in the footsteps of the UK’s Financial Conduct Authority, Germany’s Federal Financial Supervisory Authority (BaFin) announced on Thursday that it plans to make permanent the European Securities and Markets Authority’s (ESMA) product intervention measures.
“In [making the rules permanent],” BaFin said in a statement, “the Federal Agency is permanently aligning the level of protection in Germany with the temporary product intervention [measures] of ESMA. This is intended to prevent attempts to evade these measures by providers from other EU countries.”
The German regulator published a ‘draft general administrative act’ on its website on Thursday morning. The act, which proposes a series of rules governing the sale of contracts for difference (CFDs), is almost identical to ESMA’s product intervention measures. Firms have until January 10th to respond to the rules. Of course, most people, from now until the beginning of January, will be celebrating the Christmas holidays, which may make formulating a response difficult.
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BaFin – no lover of the retail industry
Like the French Autorité des Marchés Financiers in France, BaFin has been much more outwardly opposed to the retail trading industry than some other regulators. In the past two weeks, for example, it has published two lengthy documents advising retail customers on how to avoid being scammed by contracts for difference and foreign exchange brokers.
Thus, the German regulator’s decision to make ESMA’s product intervention measures permanent is hardly surprising. The rules, which put caps on leverage and restrict brokers’ marketing abilities, were ostensibly temporary and still have to be renewed by ESMA every three months.
But no one in the industry seriously believed that either ESMA or national regulators would simply let the measures peter out and not renew them. Instead, they seem to have been a bureaucratic means by which to give national regulators time to adopt the rules themselves and, of course, make them permanent.