ESMA Seeks Clarification Regarding Intervention Measures by Member States

As the UK and Europe prepare for Brexit during 2020 in anticipation of a final “leave” at the end of the year, European financial regulators are making sure that certain regulatory measures set forth previously for the entire European block continue to work and do not conflict with any future measures implemented by European Member States.

The regulations in question are regarding CFD products and binary options, which are currently banned in Europe. The European Securities and Markets Authority (ESMA) intends for the measures set out in MiFiR regulations to stay in place following Brexit, but is asking the European Commission to clarify how Member State regulations will be handled if they were to change and diverge from the current ESMA/MIFIR/MIFID regime.

It is conceivable that the UK, specifically the Financial Conduct Authority (FCA), following Brexit, decide to implement new regulations limiting the marketing and trading of CFDs, which may differ from those imposed by ESMA. The question then becomes, how do such local regulations and/or restrictions then apply to customers outside of the UK and in the European Union, when such customers are already subject to ESMA regulation.

It all sounds a bit confusing now, so it is expected that such matters will be hashed out during the “temporary” period that has been set out so far for financial firms. While we don’t expect the UK or European Member states to take any drastic action in tightening regulations or relaxing them, a clear distinction must be made in order for all parties to understand which rules they are to be subject to following an official exit by the UK.