ESMA publishes new Q&A on CFDs and other speculative products

The European Securities and Markets Authority (ESMA) has published today a new question and answer document (Q&A) on the application of the Markets in Financial Instruments Directive (MiFID) to the marketing and sale of financial contracts for difference (CFDs) and other speculative products to retail clients (such as binary options and rolling spot forex).

These are complex products and although it may be difficult for the majority of retail investors to understand the risks involved, they are widely advertised to the retail mass market by a number of firms, often via online platforms. There is also a considerable degree of cross-border activity across Europe in these products.

Many competent authorities have concerns about the protection of investors in this area and the purpose of the Q&A is to promote common supervisory approaches and practices in the application of MiFID and its implementing measures to key aspects that are relevant when CFDs and other speculative products are sold to retail clients.

ESMA will continue to work on this topic and aims to publish further Q&As in the coming months. This first batch of Q&As will focus on the following topics:

  • Key aspects relevant to the authorisation of firms offering CFDs and other speculative products to retail clients; and
  • Certain conflicts of interest arising from particular business model features and practices commonly observed in firms offering CFDs and other speculative products to retail clients

ESMA will also consider the need for any further work, in the medium term, in light of MiFID II requirements. The Q&As are targeted at competent authorities. However, the answers are also intended to help firms by providing clarity on MiFID rules.

The ESMA statement and the Q&A are available here.

Lavanya Rathnam

Lavanya Rathnam is an experienced technology, finance, and compliance writer. She combines her keen understanding of regulatory frameworks and industry best practices with exemplary writing skills to communicate complex concepts of Governance, Risk, and Compliance (GRC) in clear and accessible language. Lavanya specializes in creating informative and engaging content that educates and empowers readers to make informed decisions. She also works with different companies in the Web 3.0, blockchain, fintech, and EV industries to assess their products’ compliance with evolving regulations and standards.

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