ESMA statement on derivatives within the scope of national CFD product intervention measures

The European Securities and Markets Authority (ESMA) has issued a statement reminding firms of their obligations under existing national product intervention measures on contracts for differences (CFDs). The statement is in light of the growing offering of derivatives marketed as "perpetual futures" or "perpetual contracts", including those providing leveraged exposure to cryptoassets such as Bitcoin.

ESMA emphasises that where such products meet the definition of a CFD, they are likely to fall within the scope of existing intervention measures adopted by national competent authorities and must therefore comply with applicable product intervention requirements. This includes leverage limits, mandatory risk warnings, margin close-out rules, negative balance protection and the prohibition on monetary and non-monetary incentives. The statement further reminds firms that derivatives require a narrowly defined target market and an aligned distribution strategy. Firms should be carrying out appropriateness assessments in accordance with the relevant requirements for complex financial instruments when providing non advised services, and must identify, prevent and manage any conflicts of interest arising from the offering of these products. While the public statement specifically refers to derivatives marketed as perpetual futures or perpetual contracts, ESMA states that firms should assess whether national product intervention measures apply to all derivatives offered, irrespective of their commercial name.

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