The European Securities and Markets Authority (ESMA) has agreed to tighten the rules for cryptocurrency derivatives contracts.
In the document published on March, 25 ESMA puts “leverage limits on the opening of a CFD by a retail client from 30:1 to 2:1. That move will require retail investors to pay at least 50 percent of the total CFD value.
EU market watchdogs talk about CFDs as complex products, which pricing, trading terms, and settlement are not standardized. It’s undermining retail investors’ ability to understand the terms of the product.
The ESMA indicated that using cryptocurrencies still remain uncontrolled enough and this is the reason to consider tougher measures in the future to protect investors.
“Due to the specific characteristics of cryptocurrencies as an asset class the market for financial instruments providing exposure to cryptocurrencies, such as CFDs, will be closely monitored, and ESMA will assess whether stricter measures are required,” said the announcement.
The agreed measure will impose a three-month restriction on the marketing, distribution or sale
of CFDs to retail investors. And it will provide measures such as leverage limits on the opening of a CFD position, margin close-out rule per account. ESMA promise to impose negative balance protection on a per account basis and put a restriction on the incentivization of CFD trading.
These days the cryptocurrency market is under precise interest from retail investors, brokers, and dealers and they have responded to this demand with new products. “Despite being unsuitable for retail investors, binary options have been increasingly offered to them across the Union,” assures ESMA