Product Intervention

ESMA and the national competent authorities (NCAs) have product interventions powers. Those powers enable ESMA and the NCAs to temporarily restrict or prohibit the sale of financial products under certain conditions.

Who has product intervention powers?

Under the Markets in Financial Instruments Regulation (MiFIR), ESMA and NCAs have product intervention powers. The other two European Supervisory Authorities (ESAs), the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) and their NCAs, also have such intervention powers. The intervention powers for the three ESAs and the respective NCAs entered into application in January 2018.

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Which financial products can be subject to an intervention?

Under the MiFID II framework, financial instruments can be subject to a prohibition or restriction. This includes among others shares, bonds, funds (UCITS funds or alternative investment funds) and derivatives.

Moreover, a prohibition or restriction on a type of financial activity or practice can be imposed.

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Which conditions must be met before ESMA can take measures?

Firstly, the issue must raise either:

  • a significant investor protection concern; or
  • a threat to the orderly functioning and integrity of financial markets or commodity markets; or
  • a threat to the stability of the whole or part of the financial system.

And secondly:

  • regulatory requirements under EU law that apply to the financial instrument or activity do not address the threat/concerns mentioned above; and
  • no NCA has taken action to address the problem, or the actions taken do not adequately address the problem.

ESMA’s adopted product intervention measures are temporary and cannot exceed three months. However, ESMA can renew a measure at the end of the three-month period. The measures apply to all EU Member States, and all market participants providing MiFID II-related financial services in the EU are obliged to comply with them.

In contrast, NCAs’ adopted measures can be permanent. These measures can apply to:

  • market participants established in the jurisdiction of the NCA adopting the measure; and
  • market participants established in other Member States that carry out business in the jurisdiction of the NCAs adopting the measure.
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When have product intervention powers been used?

In March 2018 ESMA agreed on temporary product intervention measures on the provision of Contracts for Differences and Binary Options to retail investors in the EU. The agreed measures included:

  • for Binary Options: a prohibition on the marketing, distribution or sale of binary options to retail investors; and
  • for Contracts for Differences (CFDs): a restriction on the marketing, distribution or sale of CFDs to retail investors.

These measures were formally adopted by ESMA in June 2018 and took effect on 2 July 2018 and on 1 August 2018 respectively. Afterwards, ESMA agreed between August 2018 and March 2019 to renew these product intervention measures for respective additional three-month periods.

NCAs can also take product intervention measures under MiFIR. At least one month before a measure is intended to take effect, an NCA must notify all other NCAs and ESMA of the details of its proposed measure and the related evidence, unless there is an exceptional case where it is necessary to take urgent action.

Under MiFIR, ESMA also has a facilitation and coordination role in product intervention measures taken by NCAs. So, after receiving notification from an NCA of its proposed measure, ESMA must adopt an opinion on whether the proposed measure is justified and proportionate. If ESMA considers it necessary that other NCAs also take measures, this must be stated this in its opinion.

Accordingly, between March 2019 and April 2020 NCAs adopted product intervention measures in their jurisdictions

  • to prohibit the marketing, distribution or sale of binary options to retail investors; and
  • to restrict the marketing, distribution or sale of CFDs to retail investors.

Those product intervention measures by NCAs replaced ESMA’s prior temporary measures and ensured the continued protection of retail investors.

Moreover, in June 2021 ESMA issued an opinion on product intervention measures communicated by The Netherlands Authority for the Financial Markets (AFM). These measures concern turbos which are high-risk leveraged products with which investors speculate that the prices of the underlying asset, such as a share, an index or a currency, will rise or fall. ESMA’s opinion concludes that the proposed measures are justified and proportionate. ESMA’s opinion also encourages all NCAs to monitor turbos in their respective markets to assess whether similar risks for retail investors as those identified by the AFM could arise there.

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ESMA opinions on NCA proposed product intervention measures

08 June 2021 Authority for the Financial Markets of the Netherlands Opinion on the proposed product intervention measures relating to turbos

 

Contracts for differences (CFDs)
8 April 2020 Magyar Nemzeti Bank of Hungary  Opinion on the proposed product intervention measures relating to contracts for differences
3 February 2020 Finanstilsynet of Norway Opinion on the proposed product intervention measures relating to contracts for differences
27 September 2019 Cyprus Securities and Exchange Commission of Cyprus Opinion on the proposed product intervention measures relating to contracts for differences
23 August 2019 Agencija za trg vrednostnih papirjev of Slovenia Opinion on the proposed product intervention measures relating to contracts for differences
30 July 2019 Bundesanstalt für Finanzdienstleistungsaufsicht of Germany Opinion on the proposed product intervention measures relating to contracts for differences
30 July 2019 The Magyar Nemzeti Bank of Hungary Opinion on the proposed product intervention measures relating to contracts for differences
30 July 2019 The Malta Financial Services Authority of Malta Opinion on the proposed product intervention measures relating to contracts for differences
30 July 2019 Komisja Nadzoru Finansowego of Poland Opinion on the proposed product intervention measures relating to contracts for differences
23 July 2019 Finanstilsynet of Denmark Opinion on the proposed product intervention measures relating to contracts for differences
23 July 2019 Financial Supervision Commission of Bulgaria Opinion on the proposed product intervention measures relating to contracts for differences
23 July 2019 Hrvatska agencija za nadzor financijskih usluga of Croatia Opinion on the proposed product intervention measures relating to contracts for differences
11 July 2019 The Česká Národní Banka of the Czech Republic Opinion on the proposed product intervention measures relating to contracts for differences
28 June 2019 Finansinspektionen of Sweden Opinion on the proposed product intervention measures relating to contracts for differences
28 June 2019 The Autorité des Marchés Financiers of France Opinion on the proposed product intervention measures relating to contracts for differences
24 June 2019 The Financial Conduct Authority of the United Kingdom Opinion on the proposed product intervention measures relating to contracts for differences
24 June 2019 Comisión Nacional del Mercado de Valores of Spain Opinion on the proposed product intervention measures relating to contracts for differences
24 June 2019 The Finanšu un kapitāla tirgus komisija of Latvia Opinion on the proposed product intervention measures relating to contracts for differences
24 June 2019 The Hellenic Capital Market Commission of Greece Opinion on the proposed product intervention measures relating to contracts for differences
13 June 2019 The Commissione Nazionale per le Società e la Borsa of Italy Opinion on the proposed product intervention measures relating to contracts for differences
13 June 2019 The Comissão do Mercado de Valores Mobiliários of Portugal Opinion on the proposed product intervention measures relating to contracts for differences
13 June 2019 The Central Bank of Ireland Opinion on the proposed product intervention measures relating to contracts for differences
13 June 2019 The Commission de Surveillance du Secteur Financier of Luxembourg Opinion on the proposed product intervention measures relating to contracts for differences
5 June 2019 The Finantsinspektsioon of Estonia  Opinion on the proposed product intervention measures relating to contracts for differences
5 June 2019 The Národná Banka Slovenska Opinion on the proposed product intervention measures relating to contracts for differences
23 May 2019 the Bank of Lithuania Opinion on the proposed product intervention measures relating to contracts for differences
14 May 2019 the Finanssivalvonta of Finland Opinion on the proposed product intervention measures relating to contracts for differences
3 May 2019 Financial Market Authority of Austria Opinion on the proposed product intervention measures relating to contracts for differences 
26 March 2019 Authority for the Financial Markets of the Netherlands Opinion on the proposed product intervention measures relating to contracts for differences  

 

Binary Options 
8 April 2020 Magyar Nemzeti Bank of Hungary  Opinion on the proposed product intervention measures relating to binary options
3 February 2020 Finanstilsynet of Norway Opinion on the proposed product intervention measures relating to binary options
23 August 2019 Agencija za trg vrednostnih papirjev of Slovenia Opinion on the proposed product intervention measures relating to binary options
23 July 2019 Hrvatska agencija za nadzor financijskih usluga of Croatia Opinion on the proposed product intervention measure relating to binary options
28 June 2019 The  Finansinspektionen of Sweden Opinion on the proposed product intervention measure relating to binary options
28 June 2019 The Malta Financial Services Authority of Malta Opinion on the proposed product intervention measure relating to binary options
28 June 2019 The Autorité des Marchés Financiers of France  Opinion on the proposed product intervention measure relating to binary options
28 June 2019 Cyprus Securities and Exchange Commission of Cyprus Opinion on the proposed product intervention measure relating to binary options
24 June 2019 The Bundesanstalt für Finanzdienstleistungsaufsicht of Germany Opinion on the proposed product intervention measure relating to binary options
24 June 2019 The Financial Supervision Commission of Bulgaria Opinion on the proposed product intervention measure relating to binary options
24 June 2019 The Finanstilysynet of Denmark Opinion on the proposed product intervention measure relating to binary options
24 June 2019 The Finanšu un kapitāla tirgus komisija of Latvia Opinion on the proposed product intervention measure relating to binary options
24 June 2019  The Hellenic Capital Market Commission of Greece Opinion on the proposed product intervention measure relating to binary options
13 June 2019 The Commissione Nazionale per le Società e la Borsa of Italy Opinion on the proposed product intervention measure relating to binary options
13 June 2019 The Comissão do Mercado de Valores Mobiliários of Portugal Opinion on the proposed product intervention measure relating to binary options
13 June 2019 The Central Bank of Ireland Opinion on the proposed product intervention measure relating to binary options
13 June 2019 The Commission de Surveillance du Secteur Financier of Luxembourg Opinion on the proposed product intervention measure relating to binary options
5 June 2019 The Česká Národní Banka of the Czech Republic Opinion on the proposed product intervention measure relating to binary options
5 June 2019 The Finantsinspektsioon of Estonia  Opinion on the proposed product intervention measure relating to binary options
5 June 2019 The Národná Banka Slovenska Opinion on the proposed product intervention measure relating to binary options
23 May 2019 Comisión Nacional del Mercado de Valores of Spain Opinion on the proposed product intervention measures relating to binary options
23 May 2019 the Bank of Lithuania Opinion on the proposed product intervention measures relating to binary options
14 May 2019 the Finanssivalvonta of Finland Opinion on the proposed product intervention measures relating to binary options
3 May 2019 Financial Market Authority of Austria Opinion on the proposed product intervention measures relating to binary options
26 March 2019 the Financial Conduct Authority of the United Kingdom Opinion on the proposed product intervention measures relating to binary options
26 March 2019 Authority for the Financial Markets of the Netherlands Opinion on the proposed product intervention measures relating to binary options
26 March 2019 Komisja Nadzoru Finansowego of Poland Opinion on the proposed product intervention measures relating to binary options
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