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Restrictions on trading of binary options and CFD

18/01/2018

On 23 March 2018, the European Securities and Markets Authority (ESMA) announced a ban in the European Union against trading binary options to individual investors and a restriction on “Contracts for Difference” (CFD).

On 23 March 2018, the European Securities and Markets Authority (ESMA) announced a ban in the European Union against trading binary options to individual investors and a restriction on “Contracts for Difference” (CFD).

The ban on binary options for individuals covers marketing, distribution and trading. With regard to CFDs, the restriction covers trading, distribution or sale of certain CFDs to individuals. This restriction is reflected by: limits on the lever effect with a specific limit for the CFD on crypto-currencies; a closure rule by account as soon as the margin exceeds a certain level; an account cannot display a negative balance; suppliers of CFDs are prohibited from encouraging the public to invest in these products; and finally, a warning on the risks attached to the products authorised.

ESMA adds that the new provisions will apply one month after their publication in the Official Journal of the EU (OJ) for binary options and two months after for CFDs.