The European Securities and Markets Authority (“ESMA”) has released a Call for Evidence on potential product intervention measures on contracts for differences and binary options to retail clients (the “Paper”). The Paper considers how contracts for differences (“CFDs”) on cryptocurrencies could fall within the scope of the MiFID regulatory framework as financial instruments.
Within the Paper, ESMA also considers whether CFDs on cryptocurrencies should be addressed in the proposed intervention measures and whether a 5:1 initial leverage would provide investors with sufficient protection. Alternatively, ESMA proposes introducing a lower leverage limit (as low as 1:1) or more stringent measures including a ban on the marketing, distribution or sale of CFDs in cryptocurrencies to retail clients.
The Paper has been published in response to a heightened concern amongst ESMA and several national authorities in relation to the risks brought about by the complexity of CFDs and binary options, particularly seeing as there has been a rapid increase in the marketing, distribution and sale of CFDs and Binary Options to retail investors across the EU.
Interested parties are invited to submit comments online at http://www.esma.europa.eu/ by no later than 5 February 2018.
The full version of the Paper can be found here https://www.esma.europa.eu/sites/default/files/library/esma35-43-904_call_for_evidence_-_potential_product_intervention_measures_on_cfds_and_bos_to_retail_clients.pdf