Maijoor: There is Too Much Retail Product Innovation

The ESMA chairman also implied that retail trading damages the financial services industry's reputation

Speaking on the Australian Securities and Investment Commission’s podcast, Steven Maijoor said that there is too much innovation in the investment products sector and not enough that focuses on benefiting retail clients.

Maijoor, who is the chairman of the European Securities and Markets Authority, made the claims in response to the claim that product intervention measures stifle innovation in the financial services industry.

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“What we have seen in the financial markets is that there’s too much innovation, which is supply driven, which is producer driven, where there is [an idea] about a new business line to generate revenues,” said Maijoor.

“Of course I understand that suppliers in this market need to have the possibility to make profits.”

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The ESMA chairman made his comments in the context of a wider conversation on product intervention powers. Those powers, which have been available to ESMA since January of last year, have only been used to govern retail trading products.

“What we’re not seeing sufficiently, in terms of innovation in financial markets, is innovation that is really driven by what does the client need? What does the consumer need to improve their investments, to improve their investment behaviour and to get a better deal?” said the ESMA chairman.

“And it is very difficult to see how the product intervention powers in any way would block that type of innovation. No regulator would block an innovation where it’s obviously beneficial to the end client.”

Asked if he would provide any advice to ASIC, which is also considering a ban on CFDs and binary options, Maijoor implied that there is no point in providing products to retail clients that they don’t need and which result in large-scale losses.

“There is no benefit to the financial sector of having a product where there are reputational issues,” he said. “If at the end of the day there’s a large share of the client base which is losing money, that is also backfiring on the industry.”

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