With two weeks to go before the implementation of the EU’s dreaded new regulatory overhaul, MiFID II has struck again…
This time it’s hit the shares of several derivatives brokers which provide platforms for retail (mainly) investors to speculate on global stocks, currencies, commodities, and ETFs. Only a few days ago, we explained how banks were demanding an 11-th hour reprieve due to thousands of investors and corporate issuers lacking the Legal Entity Identifiers (LEI’s) which could see them shut of markets from 3 January 2018. According to Bloomberg.
Shares of stock derivative brokers including IG Group Holdings Plc, Plus500 Ltd. and CMC Markets Plc sank 14 percent or more in London after European regulators laid out harsher-than-expected potential rules on some speculative financial products. The companies operate some of the largest platforms for retail investors to trade contracts for difference, which are derivatives that allow investors to speculate on the price of stocks, currencies, and commodities without owning them. The European Securities and Markets Authority, using powers set out in the overhaul of financial rules known as MiFID II, outlined late Friday how it may curb leverage, limit how much clients can lose on the contracts and ban the sale of binary options.
“ESMA has been concerned about the provision of speculative products such as CFDs, including rolling spot forex, and binary options to retail clients for a considerable period of time and has conducted ongoing monitoring and supervisory convergence work in this area,” the agency said.
Shares in IG Group, which has 40% of the UK spread betting market, fell as much as 14% before finishing 9.3% down on the day. CMC Markets and Plus500 plunged as much as 19 percent before closing 12.5% and 10.8% lower, respectively.
ESMA is an EU-wide regulator, based in Paris, which is tasked with improving the functioning of financial markets across Europe, in particular strengthening investor protection and co-operation between national competent authorities. This is Bloomberg’s take on a “contract for difference”.
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