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ESMA renews restrictions on CFD trading, implies closer monitoring

Feb 01 2019
By
Jonathan Smith

 

The European Securities Markets Authority (ESMA) announced on Thursday it is renewing the restrictions on CFDs trading for another three months as of February 1, 2019. The pan-European regulator also implied that it will monitor closely forex brokerages, as it has identified certain malpractices.

 

ESMA’s decision does not come as a surprise, as the pan-European regulator is extending these measures for a third time. The reason for this is that it is only able to impose such restrictions on CFD trades on a temporary basis.

 

Ever since August last year, when these measures have been officially applied, CFD providers have been searching for ways to get around them, and more specifically the leverage cap to 1:30 for retail clients. Some of them are advertising to such clients the possibility of becoming professional clients upon request and thus becoming eligible to use higher leverage ratios. Another tactic forex broker use is moving their customers’ accounts to an intra-group third-country entity. 

 

ESMA stated it is aware of those malpractices and will monitor closely CFD providers. The regulator also implied it is possible to introduce “other Union measures” it deems appropriate.

 

We remind you that the European Securities and Markets Authority (ESMA) banned binary options, and set restrictions on CFDs for retail clients in 2018 and keeps extending these measures since then. The restrictions on forex and CFD trades include a leverage cap of 1:30, obligatory negative balance protection, and ban on trading bonuses, among other things.

 

TAGS: ESMA  forex brokers  leverage cap  Europe 
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