CONSOB to Implement Permanent Binary Options & CFD Measures

The Italian financial regulator the Commissione Nazionale per le Società e la Borsa (CONSOB) announced this Friday that it has introduced product intervention measures for binary options and contracts-for-difference (CFDs) on a permanent basis.

The product intervention measures are similar to the temporary measures already in place and force in Europe by the European Securities and Markets Authority (ESMA), the statement from the regulator said.

The permanent measures implement a ban on the marketing, distribution or sale of binary options to retail investors both from Italy and in Italy. In addition, the measures will impose certain limitations regarding the marketing, distribution, or sale of CFDs to retail investors.

For CFDs, the limitations are: “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 limits on the opening of positions; automatic closing when the margin is reached based on the account; protection from 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 based on the account; the failure to pay incentives by a CFD provider; a warning on the specific risks of the investment, to be prepared according to a standardized format.”

The measures will come into force one day after they have been published in the “Official Journal.” For binary options, the enforcement date is from the 2nd of July 2019, and for CFDs, the 1st of August this year.

According to the statement, which has been translated from Italian to English via Google: “The adoption of the measures follows the confirmation of the existence of significant concerns for the protection of retail investors in CFDs and binary options.

“This is due to the complexity and lack of transparency of these products, their peculiar characteristics - which entail, inter alia, disparity between expected return and risk of loss - as well as the ways in which they are marketed and distributed.”

CONSOB Joins Fellow EU Regulators

CONSOB is the latest financial regulator to make ESMA’s measures permanent. As Finance Magnates has reported, a number of European regulators have either implemented their own national product intervention measures or announced that they have planned to do so.

Over the past couple of months Czech, Slovak, and Estonian regulators have all introduced rules that mirror those introduced by the pan-European regulator last August.