The European Securities and Markets Authority (ESMA) has formally adopted new measures on the provision of contracts for differences (CFDs) and binary options to retail investors.
The measures have been published in the Official Journal of the European Union (OJ) today. They will start to apply from 2nd July 2018 for binary options and from 1st August 2018 for CFDs and will apply as follows:
1. Binary Options (from 2nd July 2018) – a prohibition on the marketing, distribution or sale of binary options to retail investors; and
2. Contracts for Differences (from 1st August 2018) – a restriction on the marketing, distribution or sale of CFDs to retail investors. This restriction consists of: leverage limits on opening positions; a margin close out rule on a per account basis; a negative balance protection on a per account basis; preventing the use of incentives by a CFD provider; and a firm specific risk warning delivered in a standardised way.
ESMA has adopted these measures in the official languages of the EU and they will remain in force for a period of three months from the date of application. ESMA will review the product intervention measures and consider whether to extend them for a further three-month period.
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