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The European Securities and Markets Authority’s measures in relation to marketing, distribution or sale of binary options and contracts for difference to retail clients

The Cyprus Securities and Exchange Commission has issued an announcement notifying Cyprus Investment Firms of the European Securities and Markets Authority’s recent decision to prohibit the marketing, distribution or sale of binary options to retail clients and to impose restrictions on the marketing, distribution or sale of contracts for difference to retail clients. These restrictions include leverage limits on opening positions which vary according to the volatility of the underlying asset, a margin close out rule and negative balance protection on a per account basis, prohibition of the use of incentives by providers of contracts for difference and a requirement to inform prospective investors of the risk following a prescribed format. The prohibition on binary options will take effect one month after the publication of the decision in the Official Journal of the EU, and the other measures will take effect a month later. The measures have an initial duration of three months and before they expire ESMA will consider whether it is necessary to extend them for a further three months.
The ESMA product intervention measures will override any domestic measures taken in relation to the same topic, but any national measures relating to issues not referred to in the ESMA decision remain in effect.
CySEC considers that the effect of ESMA’s decision is to bring contracts for difference on virtual currencies within the scope of the Investment Services and Activities and Regulated Markets Law of 2017, and it will revise its approach on the issue accordingly.

For further information on this matter please contact Dimitris Papoutsis or your usual contact at Elias Neocleous & Co LLC.

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