ESMA to Renew CFD Product Intervention Measures

The renewal will go live in May, meaning the measures will have been in place for a year

In what is likely to be the least surprising news you read all day, the European Securities and Markets Authority (ESMA) announced on Wednesday that it is going to be renewing its product intervention measures on contracts for difference (CFDs).

Introduced last August, these rules put caps on the amount of leverage brokers can offer retail clients when they trade in CFDs. They also prohibit certain sales and marketing practices.

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The rules are not permanent, lasting only three months. But ESMA can simply renew them at the end of each of those three month periods.

And that, thus far, is exactly what the pan-European regulator has done. This new renewal will go live at the beginning of May, taking us through to the end of August and will mean that the product intervention measures have been in place for twelve months.

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“ESMA has carefully considered the need to extend the intervention measures currently in effect,” said the regulator in a statement. “ESMA considers that a significant investor protection concern related to the offer of CFDs to retail clients continues to exist.”

Temporary now, permanent later

Though it has continued to extend the product intervention measures, the regulator may not need to do so in the future.

Since it introduced the regulations back in August of last year, a number of local regulators have issued statements implying that they are likely to put the rules into law.

In December, for instance, the UK’s Financial Conduct Authority issued a statement saying that it was planning on making the rules permanent. The British regulator also proposed a total ban on binary options and turbo certificates.

Days later, BaFin, a German regulator, said that it was going to do the same. In a statement issued at the time, BaFin said that it wanted to bring Germany’s laws in line with ESMA’s product intervention measures.

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