ESMA- Another European Regulator Joins The Club
The European Securities and Market Authority (ESMA) has been working towards pushing European regulators for alignment of regulatory frameworks. Many European countries have already converted their temporary restrictions into permanent rules and Austria is the latest country to follow suit.
Last week, Austria’s national financial watchdog, the Financial Market Authority (FMA), announced its plan to make restrictions on CFDs (Contract for Difference) and binary options permanent. This seems to be in line with ESMA’s agenda of making temporary regulatory measures related to these products permanent; however, Austria has proposed minor changes in ESMA’s framework.
As a direct result of these restrictions, there will be a permanent ban on offering and trading of binary options in Austria. The ban will also be extended to retail traders trading currency pairs and other CFD instruments. As per reports, Austria has confirmed the new regulation related to binary options will be in accordance with guidelines by the ESMA; however, these restrictions shall not prohibit any kind of participation in circumvention activities. Similarly, the FMA has proposed certain changes in respect of CFDs trading. These changes are as following:
- Explicitly define virtual currencies in the official documentation
- Non-prohibition of participation in circumvention activities expressly
- Small adjustments related to certain risk warnings, as presented in ESMA measures
It is also reported that the ESMA has already given green light to the proposed changes and adjustments. As a result, these measures are expected to come into force in Austria by the start of the next month. These restrictions that put a cap on retail customer leverage for trading CFDs and banned binary options was introduced last year as a temporary measure and now it will be converted into permanent regulation. Remember that national regulators in Netherlands, France, and Germany have either already made or in the process of making temporary measures permanent.
Similarly, the Financial Conduct Authority (FCA), the national regulator of the United Kingdom, has also announced its plan to impose similar regulations in line with ESMA measures that are expected to be enforced during the second half of this year. While the rules that FCA aims at introducing are as per ESMA measures, for the most part, there is one small difference. The FCA wants products similar to CFDs, such as turbo contracts, to be included in the regulation as well. The British watchdog is also expected to soon receive a positive signal from the ESMA.