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AFM also plans to make ESMA’s product intervention measures permanent

Apr 18 2019
By
Jonathan Smith

 

The Dutch financial regulator AFM announced its plans to make the product intervention measures of the European Securities and Markets Authority (ESMA) permanent. These measures are aimed at guaranteing greater investor protection for retail investors across the EU, and include ban on binary options trading and a number of restrictions on CFD trades, including a leverage cap of 1:30.

 

According to the official statement of the Dutch regulator “the marketing, distribution or sale of CFDs to retail investors in and from the Netherlands is restrictedas of 19 April 2019. Binary options trading is also to be prohibited permanently from the above-mentioned date.

 

We’d like to remind you that ESMA’s restrictions on CFDs include leverage limits on opening positions; a margin close-out rule on a per account basis; a negative balance protection on a per account basis; preventing the use of incentives by a CFD provider; and a standardized risk warning.

 

To be more precise, the leverage limits on the opening of a position by a retail client will range from 1:30 to 1:2, depending on the underlying asset:

- 30:1 for major currency pairs;

- 20:1 for non-major currency pairs, gold and major indices;

- 10:1 for commodities other than gold and non-major equity indices;

- 5:1 for individual equities and other reference values;

- 2:1 for cryptocurrencies.

 

These restrictions were imposed by the Pan-European regulator in March last year and it keeps renewing them since then, as the product intervention measures have a limited duration of three months. Actually, the Dutch AFM is actually following the steps of three other European regulators, who have already announced their plans to make ESMA’s restrictions permanent: the UK’s Financial Conduct Authority, the French Autorité des Marchés Financiers (AMF), and Germany’s BaFin.

 

TAGS: AFM  Netherlands  ESMA  product intervention measures  leverage cap 
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