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Stellungnahme des CFD-Verbands e.V. zu dem Entwurf Einzelfragen zur Abgeltungsteuer März 2020

Vereinfachungsregelung(en) für Verluste aus zu Absicherungszwecken abgeschlossenen Termingeschäften

Sehr geehrte Damen und Herren,

wir möchten hiermit als CFD-Verband e.V., der die Interessen der CFD-Branche vertritt, zu dem im Betreff genannten Entwurf eines Änderungsschreibens, das das BMF-Schreiben Einzelfragen zur Abgeltungsteuer; Neuveröffentlichung des BMF-Schreibens vom 18. Januar 2016 (IV C 1 - S 2252/08/10004:017, BStBl. I 2016, 85) in seiner aktuell gültigen Fassung („Abgeltungsteuerschreiben“) unter anderem mit Blick auf Anwendungsfragen der mit dem Gesetz zur Einführung einer Pflicht zur Mitteilung grenzüberschreitender Steuergestaltungen („GrenzStGestaltG“ ) vom 21. Dezember 2019 (BGBl. I 2019, 2875) eingeführten § 20 Abs. 6 Satz 5 und Satz 6 EStG ergänzen soll, Stellung nehmen. Wir möchten uns bereits ausdrücklich im Vorfeld für Ihre Bereitschaft, unserem Anliegen das notwendige Gehör zu schenken, bedanken. Wir haben als CFD-Verband mit Bedauern festgestellt, dass es bisher eine Vereinfachungsregelung, die dem Sicherungszweckzusammenhang zwischen Termingeschäften, insbesondere sog. Contracts for Difference (nachfolgend auch „CFDs“) insgesamt Rechnung trägt, keinen Eingang in die neue Fassung des Abgeltungsteuerschreibens finden soll. Eine dementsprechende Ergänzung halten wir für dringend geboten, um den von dem Gesetzgeber mit der Einführung des § 20 Abs. 6 Satz 5 EStG bezweckten Schutz des Anlegers vor Verlustrisiken sachgerecht zu verwirklichen, die asymmetrische Besteuerung des Anlegers außerhalb des Bereichs von rein spekulativen Anlagen abzumildern und nachteilige Auswirkungen auf die private Wertpapierkultur und Altersvorsorge zu vermeiden. Vor diesem Hintergrund möchten wir im Rahmen unserer Stellungnahme sowohl auf die Absicherungsfunktion der CFDs als Termingeschäft im Sinne des § 20 Abs. 2 Satz 1 Nr. 3 Buchst. a) EStG als auch auf die durch das Gesetz zur Einführung einer Pflicht zur Mitteilung grenzüberschreitender Steuergestaltungen eingeführten Beschränkungen zur Verlustverrechnung bei den Einkünften aus Kapitalvermögen – insbesondere aus Termingeschäften – nach § 20 Abs. 6 Satz 5 EStG eingehen und darauf aufmerksam machen, dass nicht alle CFD-Geschäfte als Termingeschäfte hoch spekulativ sind und damit nicht von der Verlustbeschränkungsregelung
des § 20 Abs. 6 Satz 5 EStG erfasst werden sollen. In diesem Zusammenhang haben wir nachfolgende Anregungen zu Vereinfachungsregelungen für Termingeschäfte aufgeführt, die zur Absicherung von Grundgeschäften dienen. Des Weiteren möchten wir zum Schluss auf die bestehenden erheblichen verfassungsrechtlichen Bedenken im Hinblick auf die Neuregelung des § 20 Abs. 6 Satz 5 EStG hinweisen und dürfen dringend anregen, die Regelung des § 20 Abs. 6 Satz 5 EStG zu überdenken, die erstmalig ab dem 1. Januar 2021 Anwendung finden soll. I. Termingeschäfte (CFDs) als Absicherungsinstrument

Die Gesetzesmaterialien (BT-Drucks. 19/15876, 61) rechtfertigen die Neuregelung des § 20 Abs. 6 Satz 5 EStG damit, dass Termingeschäfte durch ihre begrenzte Laufzeit und durch Hebeleffekte in wesentlichem Umfang spekulativ seien; Ziel der neuen Regelung sei es, das Investitionsvolumen und die daraus für Kleinanleger entstehenden Verlustrisiken aus diesen spekulativen Anlagen zu begrenzen.

- CFDs als Termingeschäft nicht per se hochspekulativ:
Seitens des Gesetzgebers werden durch die Neuregelung des § 20 Abs. 6 Satz 5 EStG sämtliche CFD-Geschäfte ohne jegliche Abgrenzung als hoch spekulativ eingestuft. Dies überzeugt nicht. Denn bei den CFDs handelt es sich nicht per se um hoch spekulative Geschäfte. CFDs unterscheiden sich zum Bespiel von Futures dadurch, dass die CFDs kein festes Laufzeitende haben und damit nicht in ihrer Laufzeit begrenzt sind. Diese stellen zudem in besonderem Maße taugliche Instrumente dar, um sich gegen Kurs-, Wechselkurs und Zinsrisiken abzusichern. CFDs haben insbesondere die Einsatzmöglichkeit als Absicherung (hedging) zu dienen. Unter dem Begriff der Absicherung wird dabei eine Risikobegrenzung verstanden, bei der zu einem vorhandenen oder antizipierten Grundgeschäft ein entgegengesetztes Sicherungsgeschäft mit dem Ziel eingegangen wird, das sich Gewinne und Verluste aus beiden Geschäften
vollständig oder teilweise kompensieren.

Die ganze Stellungnahme finden Sie im PDF anbei.


Die nachfolgende Stellungnahme des CFD-Verbands zur MiFiD 2 wurde am 18.05.2020 eingereicht

Public consultation on the review of the MiFID II/MiFIR regulatory framework

Section 1. General questions on the overall functioning of the regulatory framework

Question 1. To what extent are you satisfied with your overall experience with the implementation of the MiFID II/MiFIR framework?

2. Unsatisfied

Question 1.1 Please explain your answer to question 1 and specify in which areas would you consider the opportunity (or need) for improvements:

MiFID II / MiFIR erhöhen den Verwaltungsaufwand für Finanzdienstleister, die relevante Dienstleistungen erbringen, dramatisch. Die Flut der zusätzlichen Informations-, Dokumentations- und Berichtspflichten der komplexen und umfangreichen MiFID II / MiFIR-Vorschriften verursacht einen großen zusätzlichen Verwaltungsaufwand (einmalig bei der Implementierung, aber auch fortlaufend bei der Einhaltung) und führt für die betroffenen Marktteilnehmer zu ganz erheblichen externen Kosten, insbesondere im Bereich Rechtsberatung / Compliance und IT-Dienstleistungen.

Darüber hinaus ist das Dickicht aller relevanter Vorschriften kaum noch zu durchschauen. Neben 39 (!) Durchführungsverordnungen und delegierten Verordnungen auf Level 2 (!), veröffentlicht ESMA Leitlinien und auf einer fortlaufenden Basis aktualisierte Q&As. Auf nationaler Ebene sind Durchführungsbestimmungen und –anordnungen sowie eine Vielzahl aufsichtsbehördlicher Veröffentlichungen zu berücksichtigen. Schon die aktuellen Entwicklungen zu verfolgen ist für kleinere Dienstleister nahezu unmöglich, von ihrer Umsetzung gar nicht zu sprechen.

Demgegenüber ist nicht ersichtlich, dass die zahlreichen von MiFID II / MiFIR in der EU einge-führten Maßnahmen in den Bereichen Kostentransparenz, Produkt-Governance, Verhaltensre-geln und Verbraucherschutz zu einer Erhöhung des Vertrauens von Privatanlegern geführt haben. Das Gegenteil ist der Fall, die sehr detaillierten Vorschriften und Anforderungen werden von den Anlegern als übermäßige bürokratische Belastung wahrgenommen, nicht verstanden und vielfach abgelehnt.

Zu beobachten ist auch eine Verschiebung der Dienstleistungen und der angebotenen Produkte. MiFID II / MiFIR haben dazu geführt, dass Dienstleister sich umorientieren und nunmehr verstärkt Vermögensverwaltungsleistungen statt Einzelinvestments anbieten. Dies ist u. E. auch unter Anlegerschutzgesichtspunkten fragwürdig, da für den Anleger Direktinvestments viel transparenter und einfacher nachzuvollziehen sind als indirekte Anlagen in Vermögensverwaltungen. 

Bei CFDs konnten wir zudem feststellen, dass aufgrund der Produktintervention Anbieter Privatinvestoren die Finanzinstrumente nun außerhalb der EU ohne Beschränkungen anbieten und dass die Privatanleger hierauf verstärkt zugreifen und ihren Handel im nichteuropäischen Ausland fortsetzen. Für den Anlegerschutz ist diese Entwicklung sehr negativ, da die Privatanleger hier keinerlei Anlegerschutzbestimmungen ausgesetzt sind.

Question 2. Please specify to what extent you agree with the statements below regarding the overall experience with the implementation of the MiFID II/MiFIR framework?

The EU intervention has been successful in achieving or progressing towards its MiFID II/MiFIR objectives (fair, transparent,efficient and integrated markets).     

2. rather not agree

The MiFID II/MiFIR costs and benefits are balanced (in particular regarding the regulatory burden).                 

1. disagree

The different components of the framework operate well together to achieve the MiFID II/MiFIR objectives.        

3. neutral

The MiFID II/MiFIR objectives correspond with the needs and problems in EU financial markets.               

2. rather not agree

The MiFID II/MiFIR has provided EU added value.                                                 

2. rather not agree

Question 2.1 Please provide qualitative elements to explain your answers to question 2:

Wir verweisen hier auf unsere Antwort unter 1.

Question 6. Have you identified barriers that would prevent investors from accessing the widest possible range of financial instruments meeting their investment needs?

4. Partially

Question 6.1 If you have identified such barriers, please explain what they would be:

Hier verweisen wir ebenfalls auf unsere Antwort unter 1.

Darüber hinaus muss hier insbesondere auch die Produktintervention der ESMA bei Differenzkontrakten genannt werden, die den Vertrieb von CFDs an Privatanleger beschränkt (u. a. Hebel und Nachschusspflicht). Wir halten hier das Leitbild des selbstverantwortlichen Bürgers auch im Finanzmarkt für vorzugswürdig.

II. Investor Protection

Question 31. Please specify to what extent you agree with the statements below regarding the experience with the implementation of the investor protection rules?

The EU intervention has been successful in achieving or progressing towards more investor protection.                                                                 

2. Rather not agree

The MiFID II/MiFIR costs and benefits are balanced (in particular regarding the regulatory burden).                 

1. Disagree

The different components of the framework operate well together to achieve more investor protection.                

2. Rather not agree

More investor protection corresponds with the needs and problems in EU financial markets.                                         

1. Disagree

The investor protection rules in MiFID II/MiFIR have provided EU added value.                                                 

2. Rather not agree

Question 31.1 Please provide both quantitative and qualitative elements to explain your answer and provide to the extent possible an estimation of the benefits and costs. Where possible, please

provide figures broken down by categories such as IT, organisational arrangements, HR etc.

MiFID II/MiFIR haben zu ganz erheblichen Kostensteigerungen für die Anbieter geführt – dies betrifft sowohl Einmalkosten als auch fortlaufende Implementierungskosten.

Im Wesentlichen geht es hier um Kosten für die Bereiche IT und Compliance. Festzustellen ist, dass die entsprechenden Regelungen nicht zu einem höheren Gewinnverhältnis der stärker aufgeklärten Kunden bei deren Investitionen in Finanzinstrumente geführt haben. Weiter konnten wir vielmehr feststellen, dass ein Teil der Kunden in das nicht-regulierte EU-Ausland abgewandert ist, um dort in nicht-regulierte Produkte investieren zu können – und dort einem deutlich niedrigeren Anlegerschutz ausgesetzt ist. 

1. Easier access to simple and transparent products

Question 33. Do you agree that the MiFID II/MiFIR requirements provide adequate protection for retail investors regarding complex products?

1. Disagree

Question 33.1 If your answer to question 33 is on the negative side, please indicate in the text box which amendments you would like to see introduced to ensure that retail investors receive adequate protection when purchasing products considered as complex under MiFID II/MiFIR:

Question 33.1 Please explain your answer to question 33:

Unser Verband ist der Ansicht, dass Anleger in einigen Fällen „überschützt“ sind und dass das Kriterium der Komplexität allein kein aussagekräftiges Kriterium ist – und unter diesem Aspekt das Konzept der MiFID grundsätzlich überdacht werden sollte. Komplexität allein in der Form der Einbindung einer derivativen Komponente führt noch nicht zu einer größeren Gefährdung bzw. Schutzbedürftigkeit. Derivate die einen bekannten Basiswert 1 zu 1 abbilden, sind für den Anleger einfach verständlich. Anleger nehmen CFDs nicht als komplexe Produkte wahr – und haben auch kein Verständnis für diese Einordnung. Demgegenüber ist ein diversifiziertes Portfolio oder ein entsprechender Investmentfonds strukturierter und damit für den Anleger weniger transparent und verständlich.

2. Relevance and accessibility of adequate information

Question 34.Should all clients, namely retail, professional clients per se and on request and ECPs be allowed to opt-out unilaterally from ex-ante cost information obligations, and if so, under which conditions?

Professional clients and ECPs should be exempted without specific conditions.  Yes

Only ECPs should be able to opt-out unilaterally.    No

Professional clients and ECPs should be able to opt-out if specific conditions are met.   No

All client categories should be able to opt out if specific conditions are met.  Yes

Other              N.A.

Please specify what is your other view on whether all clients, namely retail, professional clients per se and on request and ECPs should be allowed to opt-out unilaterally from ex-ante cost information obligations?

Question 34.1 Please explain your answer to question 34 and in particular the conditions that should apply:

Unsere praktische Erfahrung ist, dass viele Kunden einschließlich Privatanleger kein Interesse an entsprechenden Kosteninformationen haben. Es besteht eine Informationsüberlastung durch ein zu viel an Informationen. Gegenparteien und professionelle Kunden sind u. E. hier nicht schutzbedürftig, könnten sich im Zweifel diese Informationen selbst beschaffen und sollten ex-ante und ex-post Kosteninformationen nur erhalten können, wenn sie dies ausdrücklich verlangen. Privatanleger sollten die Möglichkeit erhalten, auf ausdrückliche und widerrufliche Erklärung auf die zur Verfügung Stellung der Kosteninformationen zu verzichten.

Question 35. Would you generally support a phase-out of paper based information?

5. Support completely

Question 36. How could a phase-out of paper-based information be implemented?

 

General phase-out within the next 5 years   Yes

General phase out within the next 10 years No

For retail clients, an explicit opt-out of the client shall be required. Yes

For retail clients, a general phase out shall apply only if the retail client did not expressively require paper based information  Yes

Question 37. Would you support the development of an EU-wide database (e.g. administered by ESMA) allowing for the comparison between different types of investment products accessible across the EU?

Do not support

Question 37.1 Please explain your answer to question 37:

3. Client profiling and classification

Question 40. Do you consider that MiFID II/MiFIR can be overly protective for retail clients who have sufficient experience with financial markets and who could find themselves constrained by existing client classification rules?

5. Fully agree

Question 40.1 Please explain your answer to question 40:

Unseres Erachtens gibt es keinen Zweifel daran, dass MiFID II/MiFIR für Privatkunden mit ausreichender Erfahrung, was Finanzmärkte und Finanzprodukte anbetrifft, übermäßig schützend sind und dass die Privatkunden mit entsprechender Erfahrung unangemessen durch die bestehende Kundenklassifizierung beschränkt werden. Die Kriterien für die Hochstufung eines Privatkunden zum professionellen Kunden sind zu starr – insbesondere die Kriterien, Bankguthaben und Finanzinstrumenten im Wert von mehr als 500.000 Euro und Berufserfahrung im Kapitalmarkt von mindestens einem Jahr – und verwehren daher in der Regel auch sehr erfahrenen Privatkunden, die von ihren Erfahrungen und Kenntnissen nicht schutzbedürftig sind – und auch den Schutz nicht in Anspruch nehmen wollen - die Hochstufung zum professionellen Kunden. Nur die wenigsten der im Handel mit Finanzinstrumenten erfahrenen Kunden verfügen über entsprechende Vermögensmittel oder haben einen Beruf im Kapitalmarkt ausgeübt.  

Demgegenüber stellt die Delegierte Verordnung zur MiFIR im Rahmen der Produktintervention neben der Kunden-Einstufung auch ab auf die Qualifikation und Befähigung der Kunden, die wirtschaftliche Situation, die finanziellen Kernziele der Kunden, aber auch auf den Nominalwert des Finanzinstruments, den relativen Anteil des Produkts in den Portfolios der Anleger etc. Diese Kriterien finden keine oder nicht ausreichende Berücksichtigung bei der Kundenklassifizierung.  

Question 41. With regards to professional clients on request, should the threshold for the client’s instrument portfolio of EUR 500 000 (See Annex II of MiFID II) be lowered?

5. Fully agree

Question 41.1 Please explain your answer to question 41:

Die Schwelle von EUR 500.000 ist weitaus zu hoch und steht auch vom Verhältnis her in überhaupt keiner Relation zu der Größenordnung, in der der Privatkunde investiert. Der Schwellenwert sollte noch im Verhältnis zum investierten Betrag stehen. Darüber hinaus ist das Schutzbedürfnis unseres Erachtens schon fraglich, wenn nur kleinere Beträge investiert werden. Dieses Kriterium – investierter Betrag – findet – anders als im Rahmen der Produktintervention keinerlei Berücksichtigung. Das ist unseres Erachtens nicht sachgerecht. 

Übertragen auf das CFD-Geschäft sehen wir als relevanten Schwellenwert ein CFD-Handelskonto mit einer Einlage (eingezahltem Betrag) von EUR 10.000. Wichtig ist hierbei, dass es sich dabei nicht um das gesamte Vermögen des Kunden handelt, sondern nur um den von dem Kunden auf dem CFD-Konto eingezahlten Betrag. Die Größenordnung von EUR 10.000 ist bewusst gewählt. Im Jahre 2016 hat die BaFin entschieden, von einem geplanten Verbot des Vertriebs von Bonitätsanleihen an Privatkunden abzusehen, wenn die Bonitätsanleihen eine Stückelung von mindestens EUR 10.000 haben. In dieser Größenordnung seien die Bonitätsanleihen kein typischen Kleinanlegerprodukt mehr.

Question 42. Would you see benefits in the creation of a new category of

semi-professionals clients that would be subject to lighter rules?

5. Fully agree.

Question 42.1 Please explain your answer to question 42:

Wie schon oben festgestellt, sind MiFID II/MiFIR für Privatkunden mit ausreichender Erfahrung, was Finanzmärkte und Finanzprodukte anbetrifft, übermäßig schützend und Privatkunden mit entsprechender Erfahrung werden durch die bestehende Kundenklassifizierung unangemessen beschränkt.

Für diese erfahrenen Privatkunden sollte es zukünftig entweder möglich sein, sich unter weniger strengen Voraussetzungen als professioneller Kunden hochstufen zu lassen oder aber für diese sollte eine eigene neue Kategorie des semi-professionellen Kunden geschaffen werden, die ihren Kenntnissen und Erfahrungen und damit ihrer geringeren Schutzbedürftigkeit stärker Rechnung trägt. Hierbei sehen wir als das maßgebliche Kriterium für eine Hochstufung bzw. als Eingruppierung in eine neue Kategorie des semi-professionellen Kunden die Kenntnisse und Erfahrungen der jeweiligen Privatkunden mit Finanzprodukten. Berufserfahrung und ein Kundenportfolio in gewisser Größenordnung halten wir für weniger sachgerecht.

Sofern für die Einstufung als semi-professioneller Kunde auch eigene Angaben des Kunden relevant werden (zur Vermögenssituation, zu Kenntnissen etc.) sollte in jedem Fall gesetzlich klargestellt werden, dass sich die Wertpapierfirma auf die Angaben des Kunden verlassen kann und hier keine Verifizierungspflicht für die Wertpapierfirma besteht.

Davon abgesehen, halten wir das Leitbild des selbstverantwortlichen Bürgers auch im Finanzmarkt für vorzugswürdig. Grundsätzlich sollte auch der Privatanleger selbstverantwortlich entscheiden können, welchen Schutzgrad er wünscht. Wenn ein Privatanleger ausdrücklich auf seinen Wunsch – schriftlich und nach erfolgter Belehrung über alle rechtlichen Konsequenzen – sich dafür entscheidet, auf für ihn vorgesehene Schutzvorschriften zu verzichten, dann sollte dies unseres Erachtens auch im Kapitalmarkt möglich sein. Hier besteht ein erhebliches Ungleichgewicht zu anderem wirtschaftlichen Handeln. Ein Verbraucher kann beispielsweise in ein Zinsswapgeschäft in Form eines Bausparvertrags auch in ganz erheblicher Größenordnung problemlos eintreten, während ein anderes Swapgeschäft nur für einen Zielmarkt professioneller Kunden möglich ist.

Question 45. What should be the applicable criteria to classify a client as a semi-professional client?

Semi-professional clients should possess a minimum investable portfolio of a certain amount (please specify and justify below).        4. Rather relevant

Semi-professional clients should be identified by a stricter financial knowledge test.       5. Fully relevant

Semi-professional clients should have experience working in the financial sector or in fields that involve financial expertise.   2. Rather not relevant

Semi-professional clients should be subject to a one-off in-depth suitability test that would not need to be repeated at the time of the investment.  5. Fully relevant

Other  5. Fully relevant

Please specify what other criteria should be the one applicable to classify a client as a semi-professional client:

- Ausdrücklicher schriftlicher Verzicht auf einen entsprechenden Schutz nach erfolgter Belehrung über alle rechtlichen Konsequenzen

- nachgewiesene Erfahrung durch eine entsprechende Handelsgeschäfte – für professionelle Kunden reicht hier das Tätigen von durchschnittlich zehn Geschäften von erheblichem Umfang im Quartal neben einem weiteren Kriterium (Berufserfahrung oder Vermögen); für semi-professionelle Kunden könnte man an den gleichen Handelsumfang anknüpfen – ohne ein weiteres Kriterium hinzuzunehmen

Question 45.1 Please explain your answer to question 45 and in particular the minimum amount that a retail client should hold and any other applicable criteria you would find relevant to delineate between retail and semiprofessional investors:

Aus unserer Sicht wären von den genannten Optionen ein Finanzwissenstest oder eine einmaliger vertiefter Eignungstest am geeignetsten. Sofern auf einen Portfoliobetrag abgestellt werden sollte, was nicht unsere präferierte Option ist, würden wir für das CFD-Geschäft ein CFD-Handelskonto mit einer Einlage von EUR 10.000 als relevanten Schwellenwert abstellen wollen.

Gleichwertig neben einem Finanzwissenstest und einem einmaligen vertieften Eignungstest kommen aus unserer Sicht noch als nicht genannte Optionen vom Kunden durch getätigte Handelsgeschäfte nachgewiesene Erfahrung und ein Opt-out des Kunden durch einen ausdrücklichen schriftlichen Verzicht nach erfolgter Belehrung über alle rechtlichen Konsequenzen in Betracht.

4. Product Oversight, Governance and Inducements

- nur wenn execution only betreffend –

Question 46. Do you consider that the product governance requirements prevent retail clients from accessing products that would in principle be appropriate or suitable for them?

5. Fully agree

Question 46.1 Please explain your answer to question 46:

Die Vielzahl der rechtlichen Bestimmungen auf unterschiedlichen Ebenen sowohl auf europäischer als auch auf nationaler Ebene sowie hinzukommende und ebenfalls zu berücksichtigende Erläuterungen der Aufsichtsbehörden sind für die Marktteilnehmer (Wertpapierfirmen und Investoren) nicht mehr übersichtlich und damit nicht mehr verständlich. Dies führt dazu, dass im Zweifel Finanzprodukte nicht mehr verkauft werden – auch wenn dies rechtlich zulässig wäre (beispielsweise weil sich die ESMA zu Ausnahmen irgendwann einmal geäußert hat).

Question 47. Should the product governance rules under MiFID II/MiFIR be simplified?

It should only apply to products to which retail clients can have access (i.e. not for non-equities securities that are only eligible for qualified investors or that have a minimum denomination of EUR 100.000). Yes

It should apply only to complex products.     No

Other changes should be envisaged – please specify below.   Yes

Simplification means that MiFID II/MiFIR product governance rules should be extended to other products.              N.A.

Overall the measures are appropriately calibrated, the main problems lie in the actual implementation.                       No

The regime is adequately calibrated and overall, correctly applied.            No

Question 47.1 Please explain your answer to question 47:

Wir sind der Ansicht, dass das Kriterium der Komplexität für sich allein unseres Erachtens nicht geeignet ist. Finanzinstrumente mit einer derivativen Komponente, die einen bekannten Basiswert (Blue Chip, großen Index, Wechselkurs oder Rohstoff) eins zu eins abbilden, sind für den Anleger einfach verständlich und transparent. Demgegenüber sind beispielsweise Investmentfonds viel strukturierter und für den Anleger weitaus weniger nachvollziehbar.

Für das Execution-Only Geschäft würden wir begrüßen, wenn über die Äußerungen von ESMA hinaus bereits auf gesetzlicher Ebene (Level 1 oder Level 2) klargestellt wird, dass Erleichterungen bei der Zielmarktidentifikation bestehen – und dass auf die Zielmarktüberprüfung nach einer einmaligen Zustimmung des Kunden zukünftig komplett verzichtet werden kann.    

Question 48. In your view, should an investment firm continue to be allowed to sell a product to a negative target market if the client insists? Yes

Question 48.1 Please explain your answer to question 48:

Wünschenswert wäre – bei Beibehaltung des gegenwärtigen Status - über die Klarstellung der ESMA hier auch eine gesetzliche Klarstellung auf Level 1 oder 2.

Darüber hinaus halten wir die Aufrechterhaltung eines negativen Zielmarktes neben dem Zielmarktkonzept für nicht erforderlich. Diese führt zu höherer Komplexität und Kosten bei den Marktteilnehmen und trägt auch nicht in entsprechendem Maß zu einem höheren Investorenschutz bei.  

Im Vordergrund sollte grundsätzlich auch hier der eigenverantwortliche (nach entsprechender ausdrücklicher Belehrung) Kunde stehen – und nicht eine Bevormundung des Privatanlegers gegen seinen ausdrücklichen Willen.   

Question 49. Do you believe that the current rules on inducements are adequately calibrated to ensure that investment firms act in the best interest of their clients?

4. Rather agree

Question 49.1 Please explain your answer to question 49:

Der CFD-Verband findet die aktuellen Regelungen zu Zuwendungen angemessen und befürwortet eine entsprechende Transparenz gegenüber den Investoren. Es bestehen hier jedoch nicht gleiche Wettbewerbsbedingungen für alle Produkte, da diese Regelungen beispielsweise nicht für Versicherungsprodukte gelten. 

IX. Digitalisation and new technologies

Question 90. Do you believe that certain product governance and distribution provisions of the MiFID II/MiFIR framework should be adapted to better suit digital and online offers of investment services and products?

1. Fully agree

Question 90.1 Please explain your answer to question 90:

Alle Services sollten gleichen Regelungen unterfallen und es sollten keine Regelungslücken durch neue Services entstehen, auf die MIFID II nicht in entsprechendem Umfang angewendet werden kann.

Question 91. Do you believe that certain provisions on investment services (such as investment advice) should be adapted to better suit delivering of services through robo-advice or other digital technologies?

5. Fully agree

Question 91.1 Please explain your answer to question 91:

Wir stimmen diesem vollumfänglich zu.

X. Foreign exchange (FX)

Question 92. Do you believe that the current regulatory framework is adequately calibrated to prevent misbehaviours in the area of spot foreign exchange (FX) transactions?

5. Fully agree.

Question 92.1 Please explain your answer to question 92:

Spot foreign exchange transactions ist reiner Geldhandel. Es geht hier nicht um der MiFID II unterliegende Finanzinstrumente. Der Geldhandel unterliegt der Aufsicht der Nationalbanken und der Europäischen Zentralbank. Wir sehen keinen Anlass für ein Eingreifen in die Finanzautonomie der Mitgliedstaaten.

Section 3. Additional Comments

You are kindly invited to make additional comments on this consultation if you consider that some areas have not been covered above.

Zu: Produktinterventionsmaßnahmen der ESMA

Die ESMA hat in jüngerer Vergangenheit Produktinterventionsmaßnahmen in Bezug auf Differenzkontrakte mehrfach wiederholt – auf Basis von Art. 40 MiFIR. Art. 40 Abs. 1 MiFIR ermächtigt die ESMA zu vorübergehenden Produktinterventionen. In Zeitabständen von drei Monaten sind diese gemäß Art. 40 Abs. 6 MiFIR zu überprüfen und können verlängert werden.

Wir schlagen - wie auch andere Marktteilnehmer - vor, eine Beschränkung der Wiederholungen der Produktinterventionsmaßnahme gesetzlich vorzusehen. Der Gesetzgeber beabsichtigt hier ausdrücklich nur eine vorübergehende Produktintervention. Darüber hinaus sollte das Subsidiaritätsprinzip (Vorrang des Handelns der nationalen Aufsicht) gewahrt bleiben. Von daher muss hier die Anzahl der maximalen Wiederholungen durch den Gesetzgeber geregelt werden.  

Zu: Vergleich zu anderen Hebelprodukten

Der CFD-Verband sieht durch die ESMA Produktintervention für CFDs bzw. durch Produktinterventionsmaßnahmen der nationalen Behörden eine Benachteiligung des Finanzinstrumentes CFD gegenüber anderen Hebelprodukten, die nicht gerechtfertigt und nicht verhältnismäßig ist.

So sind beispielsweise bei anderen Hebelprodukten die Hebel dieser Finanzinstrumente – auch wenn sie an Privatinvestoren vertrieben werden - nicht beschränkt.


Die nachfolgende Stellungnahme des CFD-Verbands zum Consultation Paper der IOSCO aus Februar 2018 wurde am 26.03.2018 an die IOSCO versandt.

Public Comment on IOSCO Consultation Report on Retail OTC Leveraged Products: Please find below our response to the aforesaid Consultation Report. As an association of 12 leading providers offering contracts for difference (“CFDs”) in Germany, who represent a significant portion of the German overall market, potential product intervention measures may affect the economic and legal interests of our members. The members of the German association Contracts for Difference Verband e.V. (“CFD Association”) are regulated by various European supervisory authorities, have various business models and offer their clients various types of CFDs. This is why individual members reserve the right to submit their own statements in response to the Consultation Report. In this response we firstly set out some general observations in respect of the regulation of retail OTC leveraged products, particularly CFDs, before providing specific feedback on the suggested policy measures set out in the Consultation Report.

Investor protection is a major objective of the CFD Association

One of the major objectives of the CFD Association is investor protection. As a rule, the CFD Association and its members welcome measures to improve investor protection while maintaining the freedom for investors to choose from a wide range of products with different risk profiles.

Regulation to focus on providing investor with all relevant information to make an informed investment decision

Investor protection should primarily aim at providing investors with all relevant information in order to make an informed decision rather than prohibiting products or limiting access to certain investment opportunities. CFD is an established product and the CFD market is, in general, well-functioning. In order to provide CFD investors with improved protection without curtailing their freedom to make informed investment decisions, the CFD Association supports regulatory intervention focussed not on the structure of CFD as a product but rather on the advertising / distribution of CFDs, particularly by unregulated / less regulated providers. In order to maximise the impact of such regulatory intervention and avoid regulatory arbitrage, relevant measures should be adopted and enforced consistently by all IOSCO members.

Significant investor protection concerns arising from unregulated providers

From the CFD Association’s perspective, significant investor protection concerns essentially exist almost exclusively due to the existence of unregulated CFD providers and the misleading advertising promises by these unregulated CFD providers or by CFD providers regulated by supervisory authorities in jurisdictions with lower regulatory standards compared to those maintained by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, “BaFin”), such as Cyprus. For example, in its warning of 25 July 2016, the European Securities and Markets Authority (“ESMA”) (cf. ESMA: Warning, 2016/1166, dated 25 July 2016; pp. 2 et seq. with a reference to Cyprus-based CFD providers) criticised the misconduct of Cyprus-based investment companies offering CFDs and binary options. In the context of its supervisory action plan, the Cyprus Securities and Exchange Commission has imposed administrative fines and reached settlement agreements with a number of investment firms. It has also suspended the licence of at least one firm due to suspicions of an alleged violation of the Investment Services and Activities and Regulated Markets Law of 2007 in respect of the terms of such firm’s authorisation and the conduct of business obligations when providing investment services to clients. For France, evaluations carried out by the French securities supervisor Autorité des marchés financiers (“AMF”) showed that out of a total of 1,617 complaints made by clients with regard to foreign-exchange products and binary options in the year 2015, about 1,478 cases were attributable to providers operating without a licence from a supervisor or without notification in France (cf. AMF: Rapport Annuel 2015 de l’AMF, p. 8, and Rapport du Médiateur de l’AMF, p.19). Out of the remaining 139 complaints, 118 concerned providers with a licence issued by the Cyprus Securities and Exchange Commission (“CySec”) and only 21 concerned providers with a licence from a supervisory authority in another EU Member State. This means that about 98% of all complaints made concerned unregulated providers or providers regulated (insufficiently, as it appears) by the Cypriot CySec. In Germany, too, the risks to investor protection arise from unregulated CFD providers. Only a small number of the complaints made to BaFin concerned regulated CFD providers. According to information from BaFin, about 100 complaints were made in 2015 with regard to providers regulated by a supervisory authority in another EU Member State (cf. Report on the IOSCO Survey on Retail OTC Leveraged Products, dated December 2016). Furthermore, according to an internal survey conducted by the CFD Association, the number of complaints concerning members of the CFD Association was less than 30 in 2016, for example. In this respect, the situation in Germany is similar to that in France, with regard to regulated providers. Based on the evaluations carried out by AMF and the above-quoted ESMA warning, it can be assumed that most of the examples of misleading advertising promises quoted by ESMA in the Q&A document (cf. ESMA: Q&A, 2016/1165, dated 11 October 2016, p. 36) are likewise attributable either to CFD providers who have been licensed by a supervisory authority in a jurisdiction with lower regulatory standards or to CFD providers operating without a licence from a supervisory authority or without notification.

Existing regulation should be applied consistently by all IOSCO members

Since beginning of this year with the introduction of MiFID II and PRIIPs legislation in Europe CFD providers had to adopt these new rules. This regulation is already aiming at enhancing investor protection. It is the view of the CFD Association that the impact of such new regulation should be assessed first before introducing new regulations. Furthermore, the existing regulation should be applied consistently by all IOSCO members in order to avoid regulatory arbitrage by CFD providers.

The term “retail investors”

The CFD Association is supportive of a clear distinction between sophisticated clients and those with less experience. However, the CFD Association is concerned that the broad use of the term “retail investors” in the Consultation Report negates differences between sophisticated and unexperienced investors and may risk the potential for inappropriate / excessive regulatory intervention. The main objective of any regulation should be to enable investors to make an informedinvestment decision based on such investor’s knowledge and experience. The average CFD investor is not a typical retail investor and this should be taken into account when considering the Consultation Report. The average CFD client has a wealth of experience in trading and has been trading in CFDs for several years. A market survey published by the CFD Association (CFD-Marktstudie: Typologisierung von CFD-Investoren, November 2016 and December 2017) arrives at the conclusion that the average CFD investor has been trading in CFDs for about four and a half years. 39.8% of CFD investors have been trading in CFDs for three to five years. 24.8% of CFD investors have even been trading in CFDs for six to ten years. In addition, the average CFD client spends several hours a day carrying out CFD trades. The average CFD trading time is about 3.3 hours a day and the average number of trades carried out per year is 2,190. Furthermore, 67% of the interviewed clients stated that they obtained comprehensive information before making their decision to invest. For 73.3% of the interviewed clients, the objective of trading in CFDs is to obtain an above-average return. As such, the average CFD investor’s experience in trading is far greater than that of a typical retail investor. Consequently, a distinction in regulation should be made to cater for respective differences in the type of retail investors active in the CFD market.

Comments in respect of suggested policy measures in Consultation Report

Based on the CFD Association’s view that regulation applied consistently by IOSCO’S members should focus on the distribution and marketing of CFD’s rather than the economics and the design of the product itself, please find below our comments in respect of the suggested policy measures set out in the Consultation Report.

Measure 1: Requirement for firms offering the relevant products to retail investors to be licensed

The CFD Association fully supports this measure.

As mentioned above under ‘Significant investor protection concerns arising from unregulated providers’, from the CFD Association’s perspective, significant investor protection concerns essentially exist solely due to the existence of unregulated CFD providers and the misleading advertising promises by these unregulated CFD providers or by CFD providers regulated by supervisory authorities in jurisdictions with lower regulatory standards compared to those maintained by the BaFin.

The CFD Association and its members attach great importance to improving investor protection. The CFD Association and its members support clear action against unregulated or insufficiently regulated CFD providers and against misleading advertising promises by CFD providers. Such action would lead to more investor protection and would make it more difficult for less professional providers to act on the market.

The Consultation Report acknowledges that ISOCO members are ultimately responsible for determining the scope of their regulatory perimeter and that it is not the intention of the regulatory toolkit proposed in the Consultation Report to suggest harmonising licensing. However, while the CFD Association understands this, it has some concerns regarding the potential for clients moving to unlicensed firms or to jurisdictions where the licensing requirements or oversight are less strict. As such, to the extent possible, the CFD Association would urge a more common approach to licensing in order to mitigate regulatory arbitrage in the sector, which remains a serious ongoing problem.

Measure 2: Requirement for firms to incorporate a prescribed minimum margin requirement for retail investors

The measure seems to address two different risks:

(1) Firms shall establish the requirement for a minimum margin by retail investors in order to reduce the risk for investors to lose their investment; and

(2) Firms shall limit the applicable leverage in a product in order to reduce the volume of potential losses.

Generally, the CFD Association supports measures with a view to limit the risk of losses for retail investors. However, in the CFD Association’s opinion a minimum margin requirement is not needed, if the loss of investors is already limited to the balance on an investor’s trading account (see Measure 3 below on negative balance protection). This is the case in Germany: Prior to opening a new position the margin will be calculated in order to allow such trade in light of the current balance on the account. Consequently, it is suggested to take into account the following considerations when suggesting this measure.

> A minimum margin requirement is not needed if the loss of an investor is already limited to its balance on the account.

> A minimum margin requirement is static and non-flexible and ignores the fact that an investor is already fully aware of its maximum loss (assuming a negative balance protection).

> Regulation should focus on investor protection rather than changing the economics of a financial product by introducing, e.g. minimum margin requirements which result in a more expensive and less attractive product for investors.

> Any margin provided by investors is for the benefit of the CFD provider. If CFD providers calculate the margin according to the valued risk, why should regulation force CFD providers to request more margin?

Further, the CFD Association supports restrictions on excessive leverage which exceeds a leverage of 200:1. Nevertheless, the level of leverage is a product feature relating to the economics of the product. Any regulation should not target the economics of a product, but rather enhance the information of and disclosure to investors.

Firstly, the effect of leverage is not limited to the types of OTC leveraged products identified by the Consultation Report. The effect of leverage also exists with numerous other packaged retail investment and insurance products (“PRIIPs”) (e.g. warrants, turbo-warrants, options, futures, margin loans and securities lending), which are popular and have been frequently traded for decades. Further, the concept of unlimited personal liability is embedded in many other products like options and futures. This even extends, for example, to mortgages, where the liability may exceed the value of the underlying object. Product intervention measures in relation to CFDs would place CFDs at a disproportionate disadvantage, compared to similar financial instruments. From the CFD Association’s perspective, the risk of loss involved in trading in CFDs is comparable to the risk of loss involved in trading in other leveraged products, such as knock-out warrants.

Secondly, while the CFD Association would see the one-off cost of implementing a leverage limit as rather low, it is concerned that, as a result of leverage being limited, there would subsequently be a very significant fall in returns. Providers and brokers of the CFD Association expect that if leverage were reduced, up to 80% of clients would stop trading in the products with reduced leverage. Such a loss of clients could jeopardise the continued existence of providers offering CFDs and of CFD brokers, in particular in cases where the trade in CFDs accounts for a large portion of their business. For the firms concerned, this would therefore constitute a significant interference with the fundamental right to carry on an established business (protected fundamental rights: freedom to choose an occupation, freedom to conduct a business and right to property).

Just the UK Financial Conduct Authority’s announcement to reduce leverage to a maximum of 40, led the share prices of CMC Markets plc and the IG Group plc to drop drastically by 36% and 38%, respectively, on 5 December 2016. The imposition of even more strict margins could result in even worse drops of shares prices of listed companies. For smaller providers such measures could be existence-threatening.

The CFD Association expects that in such scenario its clients would turn to unregulated / less regulated providers outside the EU. Individual members have conducted a survey among their clients. This survey clearly confirms the expected behaviour: the clients have moved, or will move their accounts to Australia, Switzerland and Dubai and many of them are waiting for the UK to Brexit, as they are convinced that the UK financial services sector will be endeavoured to position itself very attractively. In addition, there is a substantial risk that the providers and brokers concerned, too, will relocate to non-EU-countries.

Any investors who would stay with EU regulated distributors despite the burden of the measures and wishing to achieve an equivalent trade volume upon leverage being limited, would have to invest a multiple of the capital currently invested, which would have to be withdrawn from other types of investment, such as savings accounts. Furthermore, investors trading in CFDs cover a large number of underlying assets, also for hedging purposes. Due to of the larger amount of capital invested, they would now be forced to invest their capital using only one strategy or only few different strategies, which would give rise to a higher risk of loss.
There are also other products that provide for high leverage, for example, warrants or knock-out warrants offered by banks, which are often positioned to compete with CFDs. Warrants with leverage above 100:1 are not rare. Such products would then, unjustifiably, be preferred over CFDs.

Thirdly, as mentioned above under ‘The term “retail investors”’, the average CFD investor’s experience in trading is far greater than that of a typical retail investor. The market study published by the CFD Association has additionally shown that CFD investors have a very high level of skill and education. According to said study, 49.9% of CFD investors have a university degree. Furthermore, the economic situation of clients is good. The average CFD investor has assets of € 50,000 to € 150,000, again according to the published market study. As such, the CFD Association questions whether such a protection is necessary for CFD clients who have deliberately decided to trade in CFDs and have comprehensive knowledge in this field.

Measure 3: Negative balance protection

The CFD Association is of the view that negative balance protection on a per account basis (applying to retail clients only) is the measure providing the best level of protection for clients as unlimited losses are avoided. It is sensible to calculate the balance at risk on a gross basis, i.e. across all positions of an investor. Negative balance protection on a per account basis (applying to retail clients only) has already been implemented in Germany.

Measure 4: Prescribed disclosures setting out the total costs of the product

The CFD Association is supportive of such measures.

As mentioned in the Consultation Report, firms in Europe are required to disclose to the client the total cost of the product as part of enhanced disclosure requirements stemming from the MiFID II legislation. In addition, firms offering the relevant products are required to provide other standardised disclosures to their clients, including information on the objectives of the product, target market and costs and charges as set out in the Regulation on Key Information Documents for Packaged Retail and Insurance-based Investment Products (PRIIPs).

Providers of the CFD Association supply investors with comprehensive information about costs of CFD (MiFID II) and comprehensive information about the risk and performance of each CFD (PRIIPs KIDs). In order to mitigate regulatory arbitrage in the sector, the CFD Association would support the extension of the MiFID II and PRIIPs KIDs regulations globally.

Measure 5: Disclosure of investor profit and loss ratios

The CFD Association is fully supportive of the full disclosure of the risks associated with such products. However, the CFD Association would make the following observations in respect of any proposal to require the disclosure of profit and loss statistics for CFD investors.

Firstly, the Consultation Report states that the provision of such information would support clients in making an informed decision about whether they wish to proceed with a high-risk product that, statistically, is more likely to result in a loss than a gain. In this regard, the CFD Association is aware of studies conducted by the Central Bank of Ireland and AMF showing that between 74 and 89% of clients trading in CFDs lose money. However, in the opinion of the CFD Association, the aforesaid studies are not applicable to Germany, as the German market is dominated by highly regulated providers and has a much smaller number of unregulated providers. The CFD Association, together with the CFin Research Center for Financial Services, has conducted its own comprehensive profit and loss study for the trade in CFDs in Germany (CFD Gewinnund Verluststatistik, November 2016). This study has also been presented to BaFin and is available to the latter. According to said study, only 62.7% of clients lose money when trading in CFDs.

Secondly, the CFD Association would be wary of requiring the disclosure of profit and loss ratios solely in the case of the products on which the Consultation Report focusses. From the CFD Association’s perspective, the risk of loss involved in trading in CFDs is comparable to the risk of loss involved in other trading products, such as knock-out warrants, and even day trading shares, options and futures. The Consultation Report also focusses on the complexity of the products. The CFD Association would argue that CFDs are not complex products; or rather the performance calculation for CFDs is not a complex issue. There is a 1:1 relationship between the performance of the CFD and the underlying price. An investor who trades a large volume can expect that the risk involved corresponds to the volume traded. Therefore, applying additional disclosure requirements to CFDs as compared to its competitor products would put it an unnecessary competitive disadvantage.

Thirdly, as mentioned above under ‘The term “retail investors”’, the average CFD investor’s experience in trading and knowledge of the product is far greater than that of a typical retail investor. As such, requiring such specific disclosure for CFD investors may be regarded as a disproportionate response for investors who have deliberately decided to trade in CFDs and have comprehensive knowledge in this field.

Measure 6: Adoption of a fair pricing methodology and use of externally verifiable price sources

The CFD Association is supportive of a fair and transparent CFD offering.

As the Consultation Report states, European investment firms are required to demonstrate fairness in pricing when executing in OTC products and have increased transparency around execution processes as part of the best execution requirements arising from MiFID 2. Providers of the CFD Association supply investors with comprehensive information about costs of CFD (MiFID II) and comprehensive information about the risk and performance of each CFD (PRIIPs KIDs). As mentioned above, in order to mitigate regulatory arbitrage in the sector, the CFD Association would support the global extension of regulations equivalent to MiFID II and PRIIPs KIDs regulations.

Measure 7: Enhanced disclosures about order execution quality

The CFD Association is supportive of a fair and transparent CFD offering.

As the Consultation Report states, European firms are required to disclose their order execution policy to their clients as part of their best execution requirements. The requirement for firms to disclose their pricing methodology is also consistent with the spirit of the legislation.

The enhanced best execution requirements in MiFID II require investment firms, including brokers, to make public the top five execution venues where they execute client orders and information on the quality of execution obtained. Execution venues are also required to make public detailed data relating to the quality of execution of transactions on that venue. As mentioned above, in order to mitigate regulatory arbitrage in the sector, the CFD Association would support the global extension of regulations equivalent to MiFID II.

Measure 8: A ban or restrictions on certain forms of marketing and sales techniques for the relevant products

The CFD Association is supportive of improved restrictions on aggressive marketing practices.

However, as noted above, most of the examples of misleading advertising promises quoted by ESMA in the Q&A document (cf. ESMA: Q&A, 2016/1165, dated 11 October 2016, p. 36) are attributable either to CFD providers who have been licensed by a supervisory authority in a jurisdiction with lower regulatory standards or to CFD providers operating without a licence from a supervisory authority or without notification. Most jurisdiction have already regulation in place (like MiFID II legislation) or apply the general rule against unfair competition (e.g. in Germany under the Act against Unfair Competition).

Accordingly, while the CFD Association is supportive of improved restrictions on aggressive marketing practices, it believes that such improved restrictions will be most effective if targeted specifically at unregulated or insufficiently regulated providers.

Measure 9: A ban or restriction on the sale and/or distribution of the relevant products by intermediaries

The CFD Association would always vote against a product prohibition in favour of (i) better client education and information, (ii) improved restrictions on aggressive marketing practices, (iii) a correct assessment of the appropriateness of a specific product for a specific client and (iv) a more accurate distinction between sophisticated clients and those with less experience / knowledge.

As mentioned above under ‘The term “retail investors”’, the average CFD investor’s experience in trading and knowledge of the product is far greater than that of a typical retail investor. An outright ban or restriction on the sale and/or distribution of CFDs would not be well received by CFD investors who would likely view such product intervention measures as an interference with the economic freedom of action of private investors and an act of patronising “responsible” citizens.


Die nachfolgende Stellungnahme des CFD-Verbands zum Call for Evidence der ESMA vom 18.01.2018 wurde am 05.02.2018 an die ESMA versandt.

Our reference: ESMA-Call-for-Evidence-CFDV05022018
Response ESMA Call for Evidence – Potential product intervention measures on contracts for differences and binary options to retail clients

Please find below our response to the aforesaid Call for Evidence. As an association of 12 leading providers offering CFDs in Germany, who represent a significant portion of the German overall market, potential product intervention measures may affect our economic and legal interests, or rather those of our members. The members of the German association Contracts for Difference Verband e.V. (“CFD Association”) are regulated by various European supervisory authorities have various business models and offer their clients various types of contracts for difference (“CFDs”). This is why individual members reserve the right to submit their own statements in this Call for Evidence. Investor protection is a major objective of the CFD Association One of the major objectives of the CFD Association is investor protection.

As a rule, the CFD Association and its members welcome measures to improve investor protection.

Significant investor protection concerns arising from unregulated providers

From the CFD Association’s perspective, significant investor protection concerns essentially exist solely owing to the existence of unregulated CFD providers active on the European market as well
as owing to misleading advertising promises by these unregulated CFD providers or by CFD providers regulated by supervisory authorities in jurisdictions with lower regulatory standards compared to those maintained by the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, “BaFin”), such as Cyprus. In its warning of 25 July 2016, the European Securities and Markets Authority (“ESMA”) (cf. ESMA: Warning, 2016/1166, dated 25 July 2016; pp. 2 et seq. with a reference to Cyprus-based CFD providers) criticised the misconduct of Cyprus-based investment companies offering CFDs and binary options. For France, evaluations carried out by the French securities supervisor Autorité des marchés financiers (“AMF”) showed that out of a total of 1,617 complaints made by clients with regard to foreign-exchange products and binary options in the year 2015, about 1,478 cases were attributable to providers operating without a licence from a supervisor or without notification in France (cf. AMF: Rapport Annuel 2015 de l’AMF, p. 8, and Rapport du Médiateur de l’AMF, p. 19). Out of the remaining 139 complaints, 118 concerned providers with a licence issued by the Cyprus Securities and Exchange Commission (“CySec”) and only 21 concerned providers with a licence from a supervisory authority in another EU Member State. This means that about 98% of all complaints made concerned unregulated providers or providers regulated (insufficiently, as it appears) by the Cypriot CySec. In Germany, too, the risks to investor protection arise from unregulated CFD providers. Only a small number of the complaints made to BaFin concerned regulated CFD providers. According to information from BaFin, about 100 complaints were made in 2015 with regard to providers regulated by a supervisory authority in another EU Member State. IOSCO Survey on Retail OTC Leveraged Products, dated December 2016). Furthermore, according to an internal survey conducted by the CFD Association, the number of complaints concerning members of the CFD Association was less than 30 in 2016, for example. In this respect, the situation in Germany is similar to that in France, with regard to regulated providers. Based on the evaluations carried out by AMF and the above-quoted ESMA warning, it can be assumed that most of the examples of misleading advertising promises quoted by ESMA in the Q&A document (cf. ESMA: Q&A, 2016/1165, dated 11 October 2016, p. 36) are likewise attributable either to CFD providers who have been licensed by a supervisory authority in a jurisdiction with lower regulatory standards or to CFD providers operating without a licence from a supervisory authority or without notification. We would like to emphasise that there have been no complaints in this connection against regulated CFD providers who have been licensed by a supervisory authority such as BaFin or the Financial Conduct Authority (“FCA”). According to the Final Report on the IOSCO Survey on Retail OTC Leveraged Products (dated December 2016), too, one of the major problems is that unregulated providers have offered CFDs to the entire retail market and have made misleading advertising promises in doing so. The CFD Association and its members support clear action against unregulated or insufficiently regulated CFD providers and against misleading advertising promises by CFD providers. Such action would lead to more investor protection and would make it more difficult for non-serious providers to act on the market. The CFD Association and its members attach great importance to improving investor protection.

Corrections to or concretisation of the statements of fact in the Call for Evidence

As for the statements of fact which are contained in the Call for Evidence launched by ESMA, the CFD Association would like to comment, correct and/or concretise as follows:

The term “retail investors”

The average CFD investor is not a typical retail investor. This definitely needs to be taken into account for the purposes of the Call for Evidence. The average CFD investor has a wealth of experience in trading, has been trading in CFDs for several years, and spends several hours a day carrying out CFD trades. The average CFD investor’s experience in trading is far greater than that of a typical retail investor. A market survey published by the CFD Association (CFD-Marktstudie: Typologisierung von CFDInvestoren, November 2016 and December 2017) arrives at the conclusion that the average CFD investor has been trading in CFDs for about four and a half years. 39.8% of CFD investors have been trading in CFDs for three to five years. 24.8% of CFD investors have even been trading in CFDs for six to ten years. The average CFD trading time is about 3.3 hours a day and the average number of trades carried out per year is 2,190. Furthermore, 67% of the interviewed clients stated that they obtained comprehensive information before making their decision to invest. For 73.3% of the interviewed clients, the objective of trading in CFDs is to obtain an above-average return.

Profit and loss statistics of CFD Association contradict the supervisory authorities’ statistics

The Call for Evidence makes reference to studies conducted by the Central Bank of Ireland and AMF showing that between 74 and 89% of clients trading in CFDs lose money. The CFD Association
is aware of these studies. In the opinion of the CFD Association, the aforesaid studies are not applicable to Germany, as the German market is dominated by highly regulated providers and has a much smaller number of unregulated providers. The CFD Association, together with the CFin Research Center for Financial Services, has conducted its own comprehensive profit and loss study for the trade in CFDs in Germany (CFD Gewinn- und Verluststatistik, November 2016). This study has also been presented to BaFin and is available to the latter. According to said study, only 62.7% of clients lose money when trading in CFDs. This shows again that the focus should be on regulating the marketing practices of CFD providers rather than on imposing restrictions on the product. According to the Call for Evidence, there is a significant risk of loss (both from trading and from transaction fees), which is magnified by the effect of high leverage. From the CFD Association’s perspective, the risk of loss involved in trading in CFDs is comparable to the risk of loss involved in trading in other leveraged products, such as knock-out certificates. In addition, the transaction fees are within the customary range for similar financial products. According to ESMA, the complexity of these products and a lack of transparent information at point of sale limit the ability of retail investors to understand the risks underlying these products. CFDs are not complex products; or rather the performance calculation for CFDs is not a complex issue. There is a 1:1 relationship between the performance of the CFD and the underlying price. An investor who trades a large volume can expect that the risk involved corresponds to the volume traded. Furthermore, the view that there is a lack of transparent information at point of sale is incorrect. Members of the German CFD Association supply investors with comprehensive information about costs of each CFD (MiFID II) and comprehensive information about the risk and performance of each CFD (PRIIPs KIDs).

Criticism about the timing of the consultation and the little time allowed for furnishing a statement

The PRIIP Regulation (Regulation (EU) No 1286 / 2014), which directly applies in all Member States of the EU, has entered into force on 1 January 2018. This Regulation provides that a key information document must be published for a PRIP or packaged retail investment product by the manufacturer of the product before the product is offered to retail investors.

CFDs are PRIPs or packaged retail investment products, according to the Regulation.

The key information document should focus on the key information that retail investors need. The key information document contains sections regarding, amongst other things, the risks of the product, potential performance scenarios, the costs and a description of the type of retail investor to whom the product is intended to be marketed, in particular in terms of the ability to bear investment loss and the investment horizon.

In addition, the Markets in Financial Instruments Directive (MiFID) 2 (Directive 2014/65/EU) on the transposing laws in the individual Member States has been applicable since 3 January 2018.

According to that Directive, a so-called product approval process is intended to specify an identified target market of end clients within the relevant category of clients for each financial instrument
and to ensure that all relevant risks to such identified target market are assessed and that the intended distribution strategy is consistent with the identified target market.

In determining the target market for CFDs, the following information is of particular importance:

– Experience with and knowledge of CFDs;
– Taking of high risks with the possibility of a total loss;
– Knowledge of risks and costs;
– Knowledge of the leverage and the related disproportionately high risk;
– Capital invested and ability to bear loss; and
– High expected return and speculative trading.

Furthermore, MiFID 2 now provides for comprehensive cost transparency through ex ante information about all costs and associated charges of the financial instruments.

Against this background, and also in light of the large number of new transparency obligations and investor protection requirements in respect of financial instruments and packaged investment products for retail investors and, hence, also in respect of CFDs, the point in time chosen by ESMA for its Call for Evidence is incomprehensible and must be strongly criticised.

To date, ESMA has not gained any insights as to the implementation and impact of the relevant investor protection and transparency requirements in the case of CFDs. However, such insights imperatively need to be taken into account when exercising discretion in the context of product intervention measures.

Exercising discretion without taking such necessary and relevant new information into account would mean exercising such discretion incorrectly.: Furthermore, a product intervention by ESMA has far-reaching consequences for the rights of the parties involved, which is why said parties need to be heard comprehensively and sufficiently. In this Call for Evidence, ESMA allows a period of little more than two weeks for the delivery of statements.

Consultations launched by ESMA typically take several months. The simultaneously running public consultation on building a proportionate regulatory environment to support SME listing, for example, provides for a consultation period of clearly above two months. Such a short period of time for statements in connection with a measure as incisive as the first product intervention intended by ESMA is inappropriate and disproportionate.

Responses to the questions raised in the Call for Evidence

Please find below our responses to the questions raised by you in your Call for Evidence.

A: Do you think that ESMA has adequately identified the instruments in the scope of its possible measures?

The effect of leverage, which has received special criticism from ESMA, also exists with numerous other packaged retail investment products (e.g. warrants, turbo-warrants, options and futures), which have been popular and frequently traded for decades. Also, the concept of unlimited personal liability is embedded in many other products like options and futures. This even extends to the example of mortgages, where the liability may exceed the value of the underlying object.

Product intervention measures in relation to CFDs would place CFDs at a disproportionate disadvantage, compared to similar financial instruments.

B: What impact do you consider that the introduction of leverage limits on the basis described above (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits. From the CFD Association’s perspective, the one-off cost of implementing a leverage limit can be classified as rather low.

However, as a result of leverage being limited, there would subsequently be a very significant fall in returns. Providers and brokers of the German CFD Association expect that if leverage were reduced, up to 80% of clients would stop trading in the products with reduced leverage.

Such a loss of clients could jeopardise the continued existence of providers offering CFDs and of CFD brokers, in particular in cases where the trade in CFDs accounts for a large portion of their business, and, for the firms concerned, would constitute a significant interference with the fundamental right to carry on an established business (protected fundamental rights: freedom to choose an occupation, freedom to conduct a business and right to property).

The mere announcement by FCA to reduce leverage to a maximum of 40 resulted in the share prices of CMC Markets plc and the IG Group plc falling drastically by 36% and 38%, respectively, on 5 December 2016. It is feared that if ESMA imposes even stricter margins, the shares prices of listed companies might fall even more drastically. For smaller providers the announced measures could be existence-threatening. Such an intervention as a “temporary” measure cannot, therefore, be proportionate. The CFD Association expects that clients would turn to unregulated providers outside the EU. Individual members have conducted a survey among their clients. This survey clearly confirms the expected behaviour: the clients have moved, or will move their accounts to Australia, Switzerland and Dubai and many of them are waiting for the UK to Brexit, as they are convinced that the UK financial services sector will be endeavoured to position itself very attractively.

In addition, there is a substantial risk that the providers and brokers concerned, too, will relocate to non-EU-countries.

The Japanese regulator foresees a leverage limit of 50:1. The UK regulator, who already has the biggest CFD Forex companies and who will soon be the biggest and closest non-EU competitor, proposes 40:1. The US regulator foresees a leverage limit of 50:1 for Forex. Investors staying with EU regulated distributors despite the burden of the measures and wishing to achieve an equivalent trade volume upon leverage being limited would have to invest a multiple of the capital currently invested, which would have to be withdrawn from other types of investment, such as savings accounts. Furthermore, investors trading in CFDs cover a large number of underlying assets, also for hedging purposes. Because of the larger amount of capital invested, they would now be forced to invest their capital using only one strategy or only few different strategies, which would give rise to a higher risk of loss.

There are also other products that provide for high leverage, for example, warrants or knock-out warrants offered by banks, which are often positioned to compete with CFDs. Warrants with leverage above 50:1 and 100:1 are not rare. Such products would then, unjustifiably, be preferred over CFDs.

C: What impact do you consider that the introduction of a margin close-out rule on a per-position basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits. The CFD Association expects a very high one-off cost in this regard (specification, programming and testing). Individual providers and brokers expect one-off costs for the implementation in the amount of € 250,000 to € 1,000,000. Such sums particularly jeopardise the continued existence of comparatively small providers and brokers.

The members expect that they will need 3 to 6 months, some of them even 9 to 12 months, to implement a margin close-out rule.

Such an intervention as a “temporary” measure is, therefore, disproportionate.

In light of the very high cost of implementation and the enormous amount of time needed for this purpose, it is feared that the providers and brokers concerned will relocate to non-EU countries.

The ongoing costs of a margin close-out rule cannot be foreseen; in this respect, the providers especially state that such a rule makes reasonable hedging in relation to such positions impossible – both for the provider and for the client. The CFD Association’s members fear that the product will become more complex with such a margin close-out rule and more difficult for clients to understand. Such a rule deprives the client of the option to define its own stop-loss limits and to deliberately accept a higher potential for loss.

The CFD Association would like to use the following example to demonstrate that such a rule may result in an absolutely disproportionate interference with the investor’s freedom of action and may lead to absolutely disproportionate results:

Example:
An investor has an account with a credit balance of € 5,000. The investor buys a position worth € 200 which requires a margin of € 40 (5:1). Under the proposed per-position rule, this constitutes a leveraged position. The broker must close the position immediately upon € 20 being lost. This is a loss of -10% on the position. No rule should oblige the retail investor to sell its investment when it is at -10%. Such a rule would place CFDs at a disproportionate disadvantage, compared to all other financial instruments. The introduction of a regulation forcing investors to sell, for example, their fund units or shares after a loss of only -10% is inconceivable. This would be a loss of -0.4% on the entire portfolio. Retail investors cannot be forced to immediately sell an investment when the portfolio value is at -0,4%.

This example shows that such a rule produces absolutely disproportionate results.

D: What impact do you consider that the introduction of negative balance protection on a peraccount basis (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits. Negative balance protection on a per account basis (applying to retail clients only) has already been implemented in Germany.

E: What impact do you consider that a restriction on incentivisation of trading (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

The CFD Association would welcome a restriction on incentivisation of trading. The CFD Association is of the opinion that incentivisation of trading primarily attracts inexperienced clients; experienced traders are less influenced by such offers.

Therefore, the CFD Association takes the view that a restriction on incentivisation of trading, when the incentivisation is generally only attracting clients to start trading or entrap the client to do more trading, would be an appropriate measure for investor protection.

A restriction on incentivisation would additionally ensure a level playing field among CFD brokers, in the opinion of the CFD Association.

Such a restriction would not give rise to one-off and/or ongoing costs and, therefore, would be likely to be both effective and proportionate, in the opinion of the CFD Association.

F: What impact do you consider that a standardised risk warning (applying to retail clients only) would have on your business? Please describe and explain any one-off or ongoing costs or benefits.
A standardised risk warning would give rise to only a small amount of one-off costs and ongoing costs. The members of the CFD Association would welcome a standardised risk warning for all market participants with a view to creating a level playing field. In addition the CFD Association would like to highlight that with the PRIIPs KIDs regulation being in force since 1 January 2018 the client is made aware of risk, costs and performance (even in a stress scenario) of each individual CFD.

G: Please provide evidence on the proportion of retail clients that use these products for hedging purposes and how the suggested measures will affect them.

According to the aforementioned market study conducted and published by the CFD Association, 14.5% of clients use CFDs for hedging, according to their own statement.

An increase in margin requirements and a restriction in the close out rule could make proper hedging completely impossible for clients as it would require more capital or would mean, that hedges
are closed while the original position is still held.

H: What impact do you consider that a prohibition on providing binary options to retail clients would have on your business? Please describe and explain any one-off or ongoing costs or benefits.

The CFD Association is always voting against a product prohibition but suggest for better client education and information as well as restriction of aggressive marketing practices.

I: What impact do you consider that the envisaged measures would have on retail investors?

We would like to make reference to our responses to previous questions which cover this issue.

The members of the CFD Association particularly fear that a leverage limit might result in investors turning to unregulated providers outside the EU.

In connection with the Call for Evidence launched by ESMA, the CFD Association has received many emails and phone calls from investors considering potential product intervention measures
an interference with the economic freedom of action of private investors and an act of patronising “responsible” citizens.

J. Do you believe that specific restrictions concerning CFDs in cryptocurrencies should be introduced? In particular, what impact do you consider that assigning a leverage limit of 5:1 to such CFDs would have on firms’ business and / or any expected additional benefits for retail clients? How would such an impact compare to that from the possible alternatives of lower leverage limits such as 2:1 or 1:1, or a prohibition on the sale, marketing and distribution of such CFDs? Please describe and explain any one-off or ongoing costs or benefits.

The CFD Association is of the view that CFDs on cryptocurrencies should equally be treated as other CFD on volatile underlyings. The leverage that is to be offered by providers should solely be
determined by the risk appetite of the provider. In connection with negative balance protection, client information and restriction of aggressive marketing practices the risk for retail clients will be
manageable.

Legal considerations

ESMA bases its product intervention powers on Article 40 MiFIR (Markets in Financial Instruments Regulation) (Regulation (EU) No 600 / 2014) in order to address investor protection concerns
in respect of such products.

Article 40 MiFIR exclusively provides for only temporary product intervention measures (cf. the first sentence of paragraph 1).

Article 40 MiFIR subsidiary and subordinated

In addition, Article 40 MiFIR is subsidiary and/or subordinated in more than just one respect. It only applies if:

a) regulatory requirements under Union law that are applicable to the relevant financial instrument or activity do not address the threat (paragraph 2(b)) and

b) a competent authority or competent authorities have not taken action to address the threat or the actions that have been taken do not adequately address the threat (paragraph 2(c)).

Article 40 MiFIR is, hence, also an expression of the principle of separation of powers and of the protection of fundamental rights. A European administrative authority should not be authorised to permanently interfere in a detrimental manner with third-party fundamental rights on the basis of a European product intervention clause.

Contingency power which is limited to exceptional cases

This is why Article 40 MiFIR should be used as a basis of authority only in really exceptional cases (cf. in particular recital 29, which explicitly emphasises more than once in this respect that ESMA should act only in “exceptional cases” – and which explicitly uses the term “contingency power”).

Consequently, very strict criteria need to be applied in determining whether the conditions for the application of this general basis of authority are fulfilled and also with respect to the exercise of discretion by the Authority – Article 40 MiFIR provides for the exercise of discretion by ESMA, cf. the first sentence of paragraph 1: “may”.

In the opinion of the CFD Association, any interference must, in light of the intended subsidiary nature of this basis of authority as an “exceptional case” and “contingency power”, be considered unlawful according to Article 40(2)(b) MiFIR as long as detailed practical knowledge about the concrete impact of the investor protection rules of MiFID 2 and the PRIIP Regulation does not
exist.

Significant investor protection concerns

According to Article 40(2) MiFIR, a product intervention measure may only be taken if the proposed action addresses a significant investor protection concern or a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of the whole or part of the financial system in the Union (cf. paragraph (2)(a)).

The fact that a significant investor protection concern is placed on an equal footing with a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of the whole or part of the financial system in the Union shows that not all investor protection concerns justify temporary product intervention measures according to Article 40 MiFIR but only such significant investor protection concerns as are, in terms of their quality, as weighty as a threat to the orderly functioning and integrity of financial markets or commodity markets or to the stability of the whole or part of the financial system in the Union.

Criteria and factors in respect of product intervention powers Article 19 Delegated Regulation (EU) 2017 / 567 lists and concretises the criteria and factors relating to the temporary product intervention powers of ESMA and, thus, the conditions that need to be fulfilled in order for ESMA to be able to intervene.

The CFD Association would like to elaborate on some of the criteria and factors mentioned in Article 19(2) Delegated Regulation (EU) 2017 / 567:

The degree of complexity of the financial instrument, the size of potential detrimental consequences, the type of clients to whom the financial instrument is marketed or sold, the degree of transparency of the financial instrument, the particular features or components of the financial instrument, the ease with which investors are able to sell the relevant financial instrument, and the
degree of innovation of the financial instrument.

Degree of complexity of the financial instrument

When assessing the degree of complexity of the financial instrument, the following aspects should be taken into account, amongst others:

– The type of the underlying or reference assets and their degree of transparency;
– The degree of transparency of costs and charges associated with the financial instrument;
– The complexity of the performance calculation; and
– Whether the instrument is bundled with other products.

With CFDs, the underlying or reference assets are shares (as a rule, blue chips), indexes, currencies and futures. There is a high degree of transparency with regard to these assets. Detailed information about the underlying assets can be obtained everywhere.

All costs and charges in connection with the trade in CFDs are shown comprehensively in the cost information: spread, commission and over-night charges.

Furthermore, MiFID 2 provides for comprehensive cost transparency by way of ex-ante cost information about all costs and associated charges of the financial instruments.

There is a 1:1 relationship between the performance of CFDs and the underlying or reference assets and a straight-line relationship between the performance of CFDs and the volume traded, which is why the performance of CFDs is easy to understand. In addition, CFDs are not bundled with other instruments.

All aspects taken into account, the degree of complexity of a CFD can be said to be rather small, based on the aforesaid criteria.

Size of potential detrimental consequences

When assessing the size of potential detrimental consequences, the following aspects should be taken into account, amongst others:

– The number of clients, investors or market participants involved;
– The relative share of the product in investors’ portfolios; and
– The scale and nature of any detriment, including the amount of loss potentially suffered.

The number of clients involved in the CFD market is negligible compared to the overall market. The CFD Association estimates that there are about 9 million share investors in Germany. In the CFD market, on the other hand, only about 65,000 to 80,000 clients are trading, holding about 180,000 accounts in total.

This means that the number of CFD investors in Germany is clearly less than one per cent of the number of German share investors and, in addition, clearly less than one tenth of a per cent of the entire German population.

Furthermore, the share of CFDs in the portfolios of those investors investing in CFDs at all is very small. The market study published by the CFD Association has shown that CFD investors invest not only in CFDs but also in a large variety of financial assets, such as savings accounts, investment funds, ETFs, shares, bonds, certificates, leveraged products, futures, currencies, insurance contracts und binary options.

The amounts of loss suffered by investors are generally small amounts of money. According to the CFD Association’s profit and loss statistics, as made available to BaFin, the median is € -331.

Clients to whom the financial instrument is marketed or sold

When assessing the clients to whom the financial instrument is marketed or sold, the following aspects should be taken into account, amongst others:

– Whether the client is a retail client, a professional client or an eligible counterparty;
– Clients’ skills and abilities, including the level of education, experience with similar financial instruments or selling practices;
– Clients’ economic situation;
– Clients’ core financial objectives; and
– Whether the instrument is being sold to clients outside the intended target market or whether the target market has not been adequately identified.

The reader of the Call for Evidence gets the impression, in the opinion of the CFD Association, that the only criterion that is of relevance to ESMA is the question of whether the client is a retail client, a professional client or an eligible counterparty.

However, Article 19(2)(c) MiFIR mandatorily requires that the other listed criteria and factors be also taken into account in the same manner.

As for the “retail investor” trading in CFDs and such retail investor’s experiences and financial objectives, we make reference to our statements above.

The market study published by the CFD Association has additionally shown that CFD investors have a very high level of skill and education. According to said study, 49.9% of CFD investors have a university degree. Furthermore, the economic situation of clients is good. The average CFD investor has assets of € 50,000 to € 150,000, again according to the published market study.

In the opinion of the CFD Association, these factors and criteria suggest that the client aspect alone is a reason why an interference by ESMA for temporary product intervention purposes is to be declined – for lack of a need for protection on the part of the relevant clients, who have deliberately decided to trade in CFDs and have comprehensive knowledge in this field.

Over and above this, the CFD Association takes the view – and does not hesitate to repeat this point – that no product intervention should occur as long as ESMA is not in possession of detailed practical knowledge about the target market, which imperatively needs to be taken into account in connection with this factor and criterion. When assessing the transparency of the financial instrument, the type and transparency of the underlying, any hidden costs and charges and the nature and risks and transparency of risks should be taken into account, amongst other aspects. In this respect, we make reference to our statements above. According to said criteria, CFDs can be classified as transparent.

It is true that when it comes to assessing the particular features and components of the financial instrument, one of the criteria and factors mentioned is leverage. However, such leverage can be found in a large number of financial instruments, see above.

Furthermore, CFDs are easy to sell: real-time prices are made available and the CFDs can be sold at any time during trading hours.

Degree of innovation of the financial instrument

The degree of innovation of the financial instrument is another relevant criterion and factor in relation to the product intervention power of ESMA.

In the 1990s, CFDs were developed in the area of investment banking with a view to evading socalled stamp duty, which had to be paid to the government in Great Britain on share transactions carried out at the London Stock Exchange.

In the opinion of the CFD Association, the contingency power of ESMA is intended to apply only in certain exceptional cases – “ESMA […] should be able to impose a prohibition or restriction on a precautionary basis before a financial instrument […] has been marketed, distributed or sold to clients a restriction is intended to be imposed on a precautionary basis before a financial instrument has been marketed, distributed or sold to clients” (cf. recital 29 MiFIR). In the opinion of the CFD Association – which opinion is supported by the criterion and factor “Degree of innovation of the financial instrument” – this is to be understood to mean that product intervention measures are intended to be taken on the basis of this power if a number of very specific and narrow conditions are met, and even then only temporarily in exceptional cases, with regard to new complex products – before such products are launched, but not with regard to financial products that have been known and accepted in the market for 30 years.

No risk of regulatory arbitrage
In order for ESMA to have product intervention powers under Article 40 MiFIR, it must additionally be ensured according to Article 40(3)(b) MiFIR that the action does not create a risk of regulatory arbitrage.

However, as stated above, such a risk particularly exists with the potential product intervention measures B – Introduction of leverage limits and C – Introduction of a margin close-out rule. It is to be feared with respect to each of these measures that CFD providers and brokers will relocate to a non-EU country because of the existential interference with their business or because of the very high cost of implementation, which may particularly jeopardise the continued existence of small providers.

The same holds true if clients themselves turn to unregulated providers in non-EU countries.

Discretionary clause

Article 40 MiFIR provides for the exercise of discretion by ESMA. The Authority must exercise its discretion in full within a first step – i.e. take all relevant conditions and criteria and factors into account.

As long as ESMA does not take into account detailed practical knowledge about the concrete impact of the investor protection provisions of MiFID 2, in particular, under the aspect of the relevant target market, and of the PRIIP Regulation in exercising its discretion, such discretion must be deemed misused for failure to take all relevant factors into account.

Furthermore, any potential product intervention by ESMA must be proportionate, the restriction must be necessary and there must not be any more moderate means.

The potential product intervention measures B – Introduction of leverage limits and C – Introduction of a margin close-out rule additionally seem to be disproportionate and unnecessary in light of the fact that fundamental rights may be affected, as stated above, namely the fundamental right of providers and brokers to carry on an established business and clients’ economic freedom of action.

A restriction on incentivisation of trading and a mandatory standardised risk warning would be much less drastic interventions whilst being appropriate measures. The CFD Association will be happy to meet with ESMA at any time face to face to further discuss this issue and offers to present ESMA on this occasion with the market study and the profit and loss statistics referred to in the present statement.