ESMA is considering the possible use of its product intervention powers under Article 40 of MiFIR to address investor protection risks with regards to binary options, CFDs, and other speculative instruments. In particular, ESMA is considering measures to:
- prohibit the marketing, distribution or sale to retail clients of binary options; and
- restrict the marketing, distribution or sale to retail clients of CFDs, including rolling spot forex.
The restrictions on CFDs currently under review are:
- leverage limits on the opening of a position between 30:1 and 5:1, whose limit will vary according to the volatility of the underlying asset;
- a margin close-out rule;
- negative balance protection to provide a guaranteed limit on client losses;
- a restriction on benefits incentivizing trading; and
- a standardized risk warning.
ESMA will conduct a brief public consultation in January 2018 on this matter. Any product intervention measure adopted by ESMA under Article 40 of MiFIR can have an initial duration of up to three months and is renewable.