ESMA issues updated Q&A on the application of marketing and sale of CFDs

ESMA issues updated Q&A on the application of marketing and sale of CFDs and other speculative products to Retail Clients subject to MiFID requirements

The European Securities and Markets Authority (ESMA) has published an updated version of its question and answer document (Q&A) on the application of the Markets in Financial Instruments Directive (MiFID) for the marketing and sale of CFDs and other speculative products to retail clients (such as binary options and rolling spot forex).

The Q&A includes 5 new questions and answers in sections 6 to 9, which address the following topics:

• the use of trading benefits when offering CFDs or other speculative products;
• the withdrawal of funds from trading accounts;
• the use of leverage when offering CFDs or other leveraged products to retail clients; and
• best execution obligations for firms offering CFDs or other speculative products to retail clients.

The purpose of MiFID is to ensure that investors, and specifically retail investors, are secured against complex products and can understand the complexity along with the risks involved when trading via online platforms to these types of instruments.

In addition to these Q&As, ESMA will also consider the need for any further work in light of MiFID II requirements that will enter into application in 2018.

As clarified by ESMA, the Q&As are targeted at competent authorities. However, the answers are also intended to help firms by providing clarity on MiFID rules.

The Q&A can be viewed here.