Announcement dated 28.03.2018 regarding ESMA Measures in Relation to CFDs And Binary Options

MNK Risk Consulting > Regulatory Developments > Announcement dated 28.03.2018 regarding ESMA Measures in Relation to CFDs And Binary Options

The Cyprus Securities and Exchange Commission (“CySEC”) issued on 28th March 2018 an Announcement drawing the attention of the Cyprus Investment Firms (“CIFs”) to the ESMA Press Release in relation to the product intervention measures on Contracts For Differences (CFDs) and Binary Options, issued by the European Securities and Markets Authority (“ESMA”) on 27 March 2018.

The measures essentially:

  1. prohibit the marketing, distribution or sale to retail clients of Binary Options; and
  2. restrict the marketing, distribution or sale to retail clients of CFDs (including rolling spot forex).

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. It is worth noting that in relation to CFDs on Virtual Currencies, the leverage restriction is now 2:1.

The aforementioned ESMA decision is, ipso facto, rendering CFDs on Virtual Currencies as financial instruments under the Investment Services and Activities and Regulated Markets Law of 2017. Therefore CySEC’s approach on this issue, as described in Circular C244, will be revisited according to the CySEC Announcement.