ESMA: Potential product intervention measures on contracts for differences and binary options to retail clients

Further to its December statement, ESMA has now published a call for evidence on potential product intervention measures relating to the provision of CFDs, including rolling spot forex, and binary options to retail investors. With regard to CFDs, proposals specifically concern: leverage limits on the opening of a position by a retail client; margin close out rule on a position by position basis. This would standardise the percentage of margin at which providers are required to close out a retail client’s open CFD; negative balance protection on a per account basis; a restriction on the incentivisation of trading provided by a CFD provider; and a standardised risk warning by CFD providers. ESMA is also considering whether CFDs in cryptocurrencies should be addressed in the measures. With regard to binary options, ESMA is considering a prohibition on the marketing, distribution or sale of binary options to retail investors. Responses are required by 5 February 2018.