ESMA Clarifies How MiFID II and MiFIR Apply to non-EU Traders

The updated Q&A clarifies the role of non-EU traders under its temporary restrictions on binary options and CFDs.

The European Securities and Markets Authority (ESMA) announced today that it has updated its Questions and Answers document relating to the temporary restrictions on binary options and CFD for brokers.

According to the document, both the binary options and CFD decisions related to MiFID II and MiFIR II apply to investment firms or credit institutions authorized in the EU, regardless of the nationality or location of their clients.

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Following the implementation of MiFIR and MiFID II earlier this year, the watchdog imposed temporary restrictions on the marketing, distribution or sale of CFDs and binary options on brokers. The Q&A discusses these measures, and the update aims to further clarify operations relating to clients established outside the European Union (EU) and non-EU nationals.

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Through its Q&A, the EU regulator seeks to promote a common approach to its temporary measures which were implemented on May 22. 2018.

Marketing for CFDs and binary options in the European Union

Both MiFID II and MiFIR aim to protect participants in the financial markets in Europe. In addition, they also aim to enhance market transparency. As a result, the supervisory powers of ESMA have grown significantly.

Following the implementation of the regulations, the way brokers are allowed to advertise their financial products has changed significantly. One of the main changes is, in addition to talking about potential benefits and returns an investor could make; a firm must also include risk warnings. While this was compulsory before, the requirements have been extended.

Something placed on your website, advertised online (even in the form of banners or small print ads) as well as what you send out to clients all need to be compliant with the regulation. Furthermore, communications between financial firms and their professional clients are now viewed as financial promotions and are therefore subject to compliance.

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