January 18, 2018 / 9:23 AM / a year ago

EU watchdog consults on spreadbetting curbs

LONDON, Jan 18 (Reuters) - The European Union’s markets watchdog has started a public consultation on its anticipated plans to restrict the sale of contracts for differences (CFDs) and binary options by spreadbetting companies.

CFDs and binary options are financial products that give an investor exposure to price movements in securities without actually owning the underlying assets such as a currency, commodity or stock.

The European Securities and Markets Authority (ESMA) flagged the plans last month, sending shares of spreadbetting firms tumbling.

It said on Thursday it was now seeking evidence on the impact of its proposed measures.

For CFDs, it proposes leverage limits, overall guaranteed limit on retail customer loses, a curb on the incentives to trade provider by firms that offer CFDs, and a standardised risk warning.

“ESMA is also considering whether CFDs in cryptocurrencies should be addressed in the measures,” the watchdog said in a statement.

For binary options, ESMA said it is considering a ban on the marketing, distribution or sale of the products to retail investors.

ESMA is concerned that retail investors face potentially significant losses from the products.

Britain’s markets regulator, the Financial Conduct Authority, also warned about the serious risk of harm from CFDs this month.

It would be the first time that ESMA uses powers to intervene in financial products given to it under the bloc’s new MiFID II securities law that came into force this month.

ESMA’s public consultation on its plans closes on Feb. 5.

Reporting by Huw Jones; editing by Jason Neely

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