EU wide regulator ESMA has announced the dates from when it is going to enforce new regulations regarding forex, CFD and binary options trading. I shared two different updates in last few months about the ESMA’s decision to lower leverage, ban binary options trading and introduce restrictions on bonus and promotions offered by the forex brokers.
The new rules were formalized by ESMA in late March after a long and thorough consultation period with industry representatives and authorities.
The dates from when new measures and rules will take effect;
July 2, 2018
- Ban on the marketing and provision of sales of binary options to retail investors.
August 1, 2018 –
- Lowering maximum leverage to 30:1 for forex majors, 20:1 for non-major pairs, gold and major world indices, 10:1 for non-gold commodities and non-major equity indices, 2:1 for crypto currencies,
- Introducing negative balance protection on every forex trading account,
- Bringing a standard stop-out level of 50% on every forex trading account,
- Restrictions on bonus and promotions provided by forex brokers to the traders
MiFIR (Markets in Financial Instruments) empowers ESMA to enforce temporary intervention rules on a three monthly basis. This means that ESMA will review and evaluate the outcomes of the new rules prior to the end of three months in order to decide whether to extend them for another three months.
Steven Maijoor, ESMA Chair, explained:
The measures ESMA has taken today are a significant step towards greater investor protection in the EU. The new measures on CFDs will, for the first time, ensure that investors cannot lose more money than they put in, restrict the use of leverage and incentives, and provide understandable risk warnings for investors.
ESMA’s prohibition on the marketing, distribution or sale of binary options to retail investors addresses the significant investor protection concerns caused by the characteristics of this product.
NCAs will monitor the impact of these measures during their application and will assess, with ESMA, what next steps are required.
On an additional note, Cypriot financial watchdog CySEC clarified that new rules including lower leverage and restrictions on promotions would also apply to non-EU citizens following the great volume of inquiries on this issue.