ESMA published its first product intervention measures in March 2018, and finds that these measures have protected retail investors by limiting distribution of speculative products to retail clients. Nearly all NCAs have taken national product intervention measures in relation to the marketing, distribution or sale of binary options and CFDs to retail clients. ESMA adopted opinions in relation to these national measures indicating whether they were justified and proportionate.
As part of its review, and renewal process, of the temporary measures in relation to binary options and CFDs, ESMA has collected significant information on the impact of its product intervention measures. In addition, ESMA ran a call for evidence and invited market participants, investors and their associations to share any further information on the effects of the measures.
The main elements of the technical advice include:
- A recommendation to the EC to address the risk of arbitrage between MiFID firms and fund management companies
- Advice on how to improve convergence and the level playing field across the EU single market, through facilitating the transformation of temporary measures into permanent ones, and alternatively extend ESMA’s powers to allow the introduction of temporary bans for 18 months
- A request for further clarification of the application of product intervention measures to firms acting on a cross-border basis
- Measures to facilitate the adoption by an NCA of a measure already adopted by ESMA
- A request for further clarification of the wording of Article 40(3) of MiFIR
The European Commission asked ESMA to report on its experience with product intervention powers, including the practical effects of the product intervention measures in relation to Contracts for Difference (CFDs) and binary options. The EC sought technical advice for the purpose of the preparation of the report that the EC shall present to the European Parliament and the Council in the context of the MiFID II and MiFIR review.
ESMA has taken into account the opinion of the Securities Markets Stakeholder Group (SMSG), the replies to the call for evidence and its experience in the application of the measures to prepare its final report.
The technical advice will now be sent to the EC.