Before now, many European regulators have been making the CFDs regulations permanent. Therefore, it is not surprising that the Dutch Financial Markets Authority (AFM) have decided to do the same. According to what the regulator revealed on Thursday, April 18th, 2019, it has decided to solidify the rules. The European regulations which guide the contracts for difference & binary options have been temporary until now. It was tagged as a temporary measure last year. Now, the regulators are going to make a lasting guideline to online trading for CFDs.
Let us recall that these rules were introduced last year August by the ESMA, (European Securities & market Authority). Now, we have learned that they will renew the rules every 3 months.
Actions By Regulators On The ESMA Regulations
Since the announcement that the CFD regulations will be revisited every three months, regulators started to adopt them fully. For instance, the Financial Conduct Authority in the UK announced that it might adopt them permanently. This was in December 2018. Also, other regulators followed suit to consider the adoption. The Germany BaFin announced that the institution is planning to adopt the CFD rules completely. Another regulator, the French financial authorities (French Autorité des Marchés Financiers) has plans to adopt the regulations too.
This leads us to the Dutch AFM announcing their plans to make the contract for differences & binary options permanent. Well, the regulator has made some statements concerning the regulations. According to them, starting from April 2019, marketing, distributing and selling of binary options will be prohibited. Not to every part of the world but Netherlands retail investors. The same regulation is going to guide the marketing, sale and distribution of CFDs to the same Netherlands retail investors.
The rules have come to stay according to the Dutch Financial Market Authority
We have already seen what the ESMA product intervention guidelines enumerated for the CFDs. Now, these Dutch regulations have also joined with a new set of rules. What we can conclude from the statements made by the AFM, is that there is a ban on binary options. Also, there are a leverage cap, ban and marketing restrictions on the introductory bonuses which CFD brokers offer.
However, we see the Dutch Financial Market Authority’s decision to make these rules permanent as an interesting development. The reason is that the regulator is using their powers from MiFIR &MiFID 11 for the first time. Let’s recall that these two European Union rules became effective since last year.
This decision simply means that the fears of many retail brokers have come to pass. Many of them in the trading industry was afraid that the ESMA rules would finally become permanent. Let’s recall that last year the regulatory body tagged them as “temporary product intervention measures.”
Right now, from what we are seeing, the temporary measure will not remain such in a short time. Already, many regulators have taken the initiative to adopt them fully. So, retail brokers have to readjust to this permanent measures that will be guiding CFD trading.