UK’s Financial Conduct Authority (FCA) said it is postponing the eventual limitations on CFD offering for retail clients at least until the beginning of 2018, in expectation of the decision of the European Securities and Markets Authority (ESMA).
Currently ESMA is considering possible product intervention measures under Article 40 of the Markets in Financial Instruments Regulation (MiFIR), but its intervention powers come into effect on January 3, 2018. Before that, any measures and product limitations must be approved by ESMA’s Board of Supervisors.
In case of a significant delay of ESMA’s decision, FCA says it would reconsider making final rules at a domestic level in the first half of 2018.
In the end of last year FCA introduced a leverage cap of 1:50 on CFDs and issued a ban on trading bonuses. Further, the regulator opened consultations on additional measures to improve the protection of retail clients, particularly the inexperienced ones. Among them was the eventual setting of an even lower cap on CFDs – 1:25 – for them, as well as lower leverage cap for other instruments. The proposals were based on ESMA’s recommendations.
Following this, several of the major forex and CFD brokers in the UK – CMC Markets, City Index and IG Group – set up a CFD association to react to FCA’s proposals.