The European Securities and Markets Authority (ESMA) announced these measures as temporary ones. The orders will be issued in the EU's official journal and come into force in one month for binary options and two months for CFDs.
The intervention measures for CFDs contain leverage restrictions on the opening of a CFD by a retail client from 30:1 to 2:1. The impact limits are: 30:1 for major currency pairs; 20:1 for non-major currency pairs, gold and major indices; 10:1 for commodities other than gold and non-major equity indices; 5:1 for individual equities and other reference values; and 2:1 for cryptocurrencies.
The other intervention measures include the following:
a margin implementation rule per account. It will ration the percentage of of margin at 50% of minimum initial required margin, demanding providers to close out 1 or more of a retail consumer`s open CFDs;
the account basis protection from the negative balance. This will state a guaranteed limit on retail client losses;
the bound of the motivation suggested to trade SFDs;
a risk prevention comprising the percentage of losses on a CFD provider`s retail investor accounts, delivered in a normalized way.
So the market for financial instruments providing exposure for cryptocurrencies will be closely monitored. The application of leverage limits can also maximise the possibility of a larger gain. Automatic margin close-out makes a degree of defence for investors as it declines, though it does not exclude, the risk that the investor loses all or more than their initial margin.
ESMA has decided to will implement a 3-month ban on the marketing, distribution or sale of binary options to retail investors since the risks connected with the inherent features of binary options, such as an expected negative return and inherent conflicts of interest, make these products unsuitable for retail investors.
In contrast with the options that can serve a valuable role in hedging exposure to certain assets, binary options do not correspond any real investment needs for retail investors. These options can also attract compulsive gambling behaviour.