ESMA extends the restrictions on the Forex market by another 3 months

The European Securities and Markets Authority (ESMA) decided to extend for the next 3 months the restrictions related to the leverage, distribution and marketing of CFD instruments. The guidelines will apply at least to the end of January 2019.

Hope dies last

A month ago, in the ESMA announcement, there was information about the release of restrictions on binary options, which were excluded from offers addressed to retail customers already 1 July 2018 (details in a separate article). The European regulator decided to add a few exclusions that gave hope to people interested in the Forex market, hoping that they will do likewise in the case of exchange rate differences (CFDs). Unfortunately, this did not happen and all previous provisions will remain valid for the next 3 months from the beginning of November.

Extract of the ESMA message:

'ESMA has carefully considered the need to extend the current intervention measure and considers that there are still serious concerns about investor protection associated with offering CFD to retail customers. He agreed to extend the limitation period from 1 November. "

Theoretically, hope is still there, but more distant. The provisions on the temporary nature of the guidelines remain valid, but ESMA will still have the right to extend this period even more - practically even indefinitely.

1 lever: 30 stays

On 26 in September this year Restrictions on limited leverage have been revised up to 1: 30 to 1: 2 depending on the group of underlying instruments.

As a reminder, the leverage is:

• 30: 1 for major currency pairs;
• 20: 1 for non-major currency pairs, gold and main indexes;
• 10: 1 for goods other than gold and common and minor stock indices;
• 5: 1 for individual actions and other benchmarks;
• 2: 1 for cryptographic currencies;

The conditions regarding the security of retail customers were also maintained, namely:

• Protection against the creation of a negative balance on the account,
• Activation of the Stop-Out mechanism at 50% security,
• Limitations of promotional campaigns in the form of offers of competitions and bonuses,
• Unification of the risk warning, including the percentage of losses on the CFD retail investors' accounts.

The only modification that was introduced is the consent to implement abridged information about the risk due to the limited number of signs on selected marketing platforms. The new formula can only be used in duly justified cases.

The form will be acceptable:

[numerical value]% of CFD retail accounts are losing funds

The next ESMA meeting, on which a decision will be taken to possibly extend the existing guidelines, will take place at the end of December 2018.

The official ESMA message