French AMF Proposes to Permanently Introduce ESMA Measures

The French financial regular, Autorité des Marchés Financiers (AMF) is preparing to introduce additional measures to curtain the marketing of binary options and CFDs. The country has been one of the most-proactive when it comes to limiting the industry and is committed to solving its problems with the above-mentioned products with a more permanent policy.

As per European regulations, national regulators can choose to implement product intervention powers on a local level, country by country. The AMF is following up on the steps of the UK's FCA and BaFin, which late last year adopted measures tailored to their specific markets.

The AMF is proposing a permanent ban on binary options and a restriction on the marketing of CFDs with trading conditions different to what we are already familiar with: 1:30 Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term, 50 percent stop out and Negative Balance Negative Balance In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader place In its most basic form, a negative balance represents an account balance in which debits exceed credits. A negative balance indicates that the account holder owes money. A negative balance on a loan indicates that the loan has not been repaid in full, while a negative bank balance indicates that the account holder has overspent.In the retail brokerage space, this phenomenon occurs when a position’s losses in an account exceeds the available margin on hand from a given trader. When a trader place Read this Term protection.

In addition, the AMF is aiming to prohibit CFD providers to encourage the public to invest in their products and mandates firms to display adequate risk warnings. The regulator is looking for feedback from industry participants on the proposed national level intervention.

EU Retail Broker Industry Changes

After binary options were prohibited since the 2nd of July 2012 and CFDs brokers greatly limited their product offerings to retail clients, the changes to the European brokerage industry have been significant.

Brokers from outside of the EU, have started targeting European clients via a variety of methods, last but not least cold-calling. Changes mandated by the ESMA have yielded a much more constrained marketing environment and client acquisition costs for brokers increased.

In the meantime brokers who are making the market themselves have divested with offshore subsidiaries, as the EU industry is seen transitioning into an STP model of operation.

Endless ESMA Renewals

The ESMA already renewed its product intervention measures against binaries on three separate occasions, leading to the current end date of July 1, 2019. The supranational European regulator also imposed restrictions on the marketing of financial contracts with differential payment (CFD) since August 1, 2018, which have already been extended twice.

After several years of debates about products acceptable to retail clients, the AMF is committed to denounce the complex and risky nature of binaries and CFDs and limit the risks for retail investors.

Just as is in the case of the EU regulation, the proposed measures are being discussed only for non-professional clients.