ESMA extends CFD restrictions for another 3 months

The ESMA (European Securities and Markets Authority) just announced the renewal of its restrictions against the marketing, distribution and sale of CFDs (contracts for difference) to retail traders. The restrictions will be extended again in 30 days for another 90-day period.

The ESMA still believes that there's a genuine trader protection problem in terms of the CFD supply.

In other words, there will be leverage limits on the opening of a trade by customers, from 30:1 to 2:1, depending on the market's current volatility. The restrictions also include an account margin liquidation obligation. This standardises the margin % (at 50% of the min. required margin) for which forex brokers are required to close one or more CFD trades initiated by a trader. It also requires protection against negative account balances, as well as a limit on the bonuses offered to trade CFDs. Lastly, forex and CFD brokers must post a standard risk warning that shows the percent of the brokers accounts that lose money.

While this is going on, several European nations have also taken steps to apply trader protection measures similar to those described above. The latest example of this is occuring in France. The AMF (France's local regulatory agency) is about to implement additional measures regulating the trading of binary options and CFDs.

The objective behind these measures is to have trader protection guidelines that are similar to ESMA's rules. These rules would go in effect throughout the country. Typically, the rules imposed by France's AMF are the same as those proposed by the ench regulator are identical to those defined by the EU Securities and Markets Authority.