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European regulator proposes sharp limits on CFDs

European regulator proposes sharp limits on CFDs

The European Securities and Markets Authority is considering a major market intervention into the rules covering contracts for difference and other binary options including how they are marketed.

The European regulator is also considering leverage limits on client positions and changes to stop loss maximums.

In addition to CFDs, commonly used by trading websites critics allege are little different from gambling, the rules would also apply to FX options and other binary contracts.

The regulator launched a taskforce looking at the uses of CFDs two years ago and issued a specific warning about their dangers to consumers last year.

‘However, ESMA remains concerned that these supervisory convergence tools may not be sufficiently effective to ensure that the risks to consumer protection are sufficiently controlled or reduced,’ it said in a statement.

‘ESMA is therefore discussing the possible use of its product intervention powers.’

The UK Financial Conduct Authority said it would delay taking any action on its own concerns about the market until ESMA issued further guidelines, but added that it was considering an equivalent series of measures.



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