ESMA/FCA: Measures on the provision of contracts for differences and binary options to retail investors in the EU

ESMA has announced a package of measures on CFDs and binary options to retail investors in the EU which include a prohibition on the marketing, distribution or sale of binary options to retail investors; and a restriction on the marketing, distribution or sale of CFDs to retail investors. ESMA intends to adopt these measures in the official languages of the EU in the coming weeks, following which ESMA will publish an official notice on its website. The measures will then be published in the Official Journal and will start to apply one month, for binary options, and two months, for CFDs, after their publication. ESMA notes that national competent authorities have analysed CFD trading across different EU jurisdictions which found that 74-89% of retail accounts typically lose money on their investments, with average losses per client ranging from €1,600 to €29,000. NCAs’ analyses for binary options also found consistent losses on retail clients’ accounts. FCA has published a synopsis of the measures and notes that it supports this action and intends to consult on whether to apply these measures on a permanent basis to firms offering CFDs and binary options to retail clients.