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EU financial watchdog mulls curbs on retail market for 'speculative' products
June 29, 2017 / 2:18 PM / in 4 months

EU financial watchdog mulls curbs on retail market for 'speculative' products

LONDON (Reuters) - The European Union’s markets watchdog said on Thursday it was discussing a bloc-wide crackdown on “speculative products” bought online by retail customers to bet on market moves.

The European Securities and Markets Authority (ESMA) said in a statement that any intervention, which its board must approve, would come into effect next January at the earliest.

The ESMA said it has been concerned about products including contracts-for-difference (CFDs), rolling spot forex, and binary options for retail investors for a considerable period of time.

CFDs allow people to bet on moves in share prices without having to buy the underlying stock. Binary options are a bet on whether a stock or other instrument will trade above or below a set level in future.

Some national regulators have introduced limits on leverage, guaranteed limits on customer losses, and imposed restrictions on the marketing and distribution of such products.

The ESMA said any action it takes would reflect this.

Britain’s Financial Conduct Authority sent stocks of firms in the sector tumbling last December after saying it had found evidence of poor conduct across the market.

People buying CFDs lost 2,200 pounds ($3,000) a year on average, the FCA said.

The British watchdog has already launched a public consultation on regulating CFDs but on Thursday said it would delay the publication of its final rules as its proposals were broadly similar to what the ESMA was discussing.

“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,” the FCA said.

The FCA will publish its review into firms selling and distributing CFDs in the near future.

Reporting by Huw Jones; Editing by Louise Ireland

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