This follows the announcement made today by the European Securities and Markets Authority (ESMA) on its consideration of product intervention measures under Article 40 of the Markets in Financial Instruments Regulation (MiFIR). ESMA’s product intervention powers can only come into effect from 3 January, 2018 at the earliest.
Given progress in ESMA’s own consideration of the use of its product intervention powers in this area, the FCA has decided to delay making final conduct rules for UK firms providing CFDs to retail clients, pending the outcome of ESMA’s discussions.
ESMA has confirmed that the measures being considered take into account requirements that have been adopted or publicly consulted on by EU National Competent Authorities (NCAs). As such, some of the measures under discussion at ESMA are broadly similar in nature to those proposed by the FCA in CP16/40, including leverage limits. ESMA is also discussing additional measures not consulted on in CP16/40, including guaranteed limits on client losses.
As indicated by ESMA, the precise nature of the measures for each category of products is still being discussed. Any decision to use product intervention powers under Article 40 of MiFIR would need to be approved by ESMA’s Board of Supervisors.
The FCA will continue to engage with ESMA to support the development of measures that promote a consistent level of investor protection across the European Union.
In the event of a significant delay to possible ESMA measures, the FCA would reconsider making final rules at a domestic level in the first half of 2018.
As we monitor the progress of ESMA’s product intervention process, the FCA will conduct further policy work in light of consultation feedback. We expect this to include a further request for additional data from a sample of UK firms over the coming months. Information received during the consultation period suggests that lower leverage is associated with better client outcomes across a number of firms. However, more detailed and comparable firm data are required to provide clarity on the impact of different factors on individual client outcomes. These data and analysis are intended to inform any future policy decisions, and provide a basis on which we can evaluate the impact of any prospective rules.
The FCA will continue its focus on the sector through its on-going programme of supervisory work. The FCA has published a statement on the outcome of its further review of appropriateness tests on its website today as a follow up to its Dear CEO letter in February 2016. We also expect to publish the outcomes of thematic work on CFD intermediaries in the near-future.