ESMA awaits traders' opinions on product intervention [Deadline for November 4]

The European Securities and Markets Authority, ESMA, wants to know the views of market participants and its clients about the impact of product intervention introduced in 2018 year, which covered the retail Forex market, CFDs and binary options.

ESMA intervention and real effects

In July and then in August 2018, ESMA has implemented legislation that has taken its toll across the European binary options and CFD industry. The first group of instruments practically ceased to exist in Europe. Contracts for exchange rate differences have been regulated to a much greater extent - incl. promotion possibilities were limited, information obligations were standardized and, above all, financial leverage limits for individual groups of instruments were introduced. According to the European regulator, everything is done for the sake of the safety of retail investors and limiting the losses recorded by them.

In practice, it quickly became apparent that traders began to select brokers from outside the European Union to bypass the bans and be able to continue trading unchanged conditions. Unofficial (not prepared by ESMA) surveys, reports and statistics do not clearly show that product intervention has brought the expected results. It is true that quarterly reports published by Polish brokerage houses, to which they are obliged by the guidelines of the Polish Financial Supervision Authority, show a moderate improvement in results

Be sure to read: Profit and loss statistics of Polish traders for the second quarter of 2019

However, it is difficult to assess the real impact of these changes due to the fact that all the time we are talking only about a certain group of European traders, a part of which in an unknown percentage has not been included in the statements (transfer of accounts outside the EU). So were there doubts in the eyes of the regulator? Not completely. The need to collect opinions is the result of the need to submit a report to the European Commission.

In the ESMA press note we read:

"The European Commission has asked ESMA to report on its experience of product intervention, including its practical effects. As part of the review and renewal process of temporary measures regarding binary options and CFDs, ESMA collected relevant information on the impact of its product intervention powers. This call for evidence encourages market participants, consumers and their associations to exchange any further information on the effects of regulatory changes that have taken place in the market last year. "

Express your opinion [to November 4]

The pan-European regulator has started the consultation period and ensures that it will take all votes into account when drawing up an official response to the European Commission.

The document prepared by ESMA reads:

"For CFDs, national financial supervisors reported a general decline in the number of retail CFD clients, bills, volume and total equity of the retail client when compared with the same period a year earlier (when CFD measures were not applicable). The share of profitable accounts of retail clients remained broadly stable and the average costs incurred by retail clients in connection with trading CFDs were significantly lower in individual periods after the introduction of ESMA. "

The deadline for submitting your opinions is 4 November 2019, which can be sent online via dedicated website.