ESMA opinion under Article 43(2) MiFIR on Slovenian product intervention measures for CFDs

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Having regard to Article 43(2) of Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (1 ), Having regard to Article 44(1) of Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (2 ), THE EUROPEAN SECURITIES AND MARKETS AUTHORITY BOARD OF SUPERVISORS HAS ADOPTED THIS OPINION:

1. Introduction and legal basis
   (1) National competent authorities (NCAs) may take product intervention measures in accordance with Article 42 of Regulation (EU) No 600/2014. At least one month before a measure is intended to take effect, an NCA must notify all other NCAs and the European Securities and Markets Authority (ESMA) of the details of its proposed measure and the related evidence, unless there is an exceptional case where it is necessary to take urgent action. (2) In accordance with Article 43 of Regulation (EU) No 600/2014, ESMA performs a facilitation and coordination role in relation to such product intervention measures taken by NCAs. In particular, after receiving notification from an NCA of its proposed measure, ESMA must adopt an opinion on whether it is justified and proportionate. If ESMA considers that the taking of a measure by other NCAs is necessary, it must state this in its opinion.

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Regulation (EU) No 600/2014 of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012 (OJ L 173, 12.6.2014, p. 84). 2 Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC (OJ L 331, 15.12.2010, p. 84). ESMA35-43-2063 OPINION OF THE EUROPEAN SECURITIES AND MARKETS AUTHORITY of 23 August 2019 on the product intervention measures relating to contracts for differences proposed by the Agencija za trg vrednostnih papirjev of Slovenia

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(3) The Agencija za trg vrednostnih papirjev of Slovenia (ATVP) notified ESMA on 24 July 2019 of its intention to take product intervention measures under Article 42 of that Regulation (national measures). Upon request from ESMA, the ATVP provided further information on the content of its notification. (4) The national measures consist of a permanent restriction on the marketing, distribution or sale of contracts for differences (CFDs) to retail clients in or from Slovenia. (5) ESMA has taken product intervention measures restricting the marketing, distribution or sale to retail clients of CFDs in Decisions (EU) 2018/796 (3 ), (EU) 2018/1636 (4 ), (EU) 2019/155 (5 ) and (EU) 2019/679 (6 ). (6) The first of these Decisions took effect on 1 August 2018. In accordance with Article 40(6) of Regulation (EU) No 600/2014, ESMA must review a temporary product intervention measure at appropriate intervals and at least every three months. These measures have been amended once and renewed three times. The measures in ESMA Decision (EU) 2019/679 (ESMA’s measures) were not renewed and expired at the end of the day on 31 July 2019. (7) The ATVP notified ESMA that the national measures are the same as ESMA’s measures at national level. The national measures are expected to take effect on 1 October 2019. (8) The ATVP notified ESMA that it has complied with the conditions in Article 42 of Regulation (EU) No 600/2014, including that it has assessed the relevance of all the factors and criteria listed in Article 21 of Commission Delegated Regulation (EU) 2017/567 (7 ) and taken into consideration all those that are relevant. In particular, the ATVP notified ESMA that it shares the reasoning given in ESMA’s measures on the existence of a significant investor protection concern, as relevant to Slovenia and the conditions in Article 42 of Regulation (EU) No 600/2014. (9) The national measures are planned to take effect two months after the expiry of ESMA’s measures. Nevertheless, the ATVP informed ESMA that it considers that the risk of unrestricted CFDs being offered again to retail clients during that time period would be very limited, also considering the size of the Slovenian market and the national measures of other Member States. Furthermore, the ATVP is not aware of any activity of CFD

3 European Securities and Markets Authority Decision (EU) 2018/796 of 22 May 2018 to temporarily restrict contracts for differences in the Union in accordance with Article 40 of Regulation (EU) No 600/2014 of the European Parliament and of the Council (OJ L 136, 1.6.2018, p. 50). 4 European Securities and Markets Authority Decision (EU) 2018/1636 of 23 October 2018 renewing and amending the temporary restriction in Decision (EU) 2018/796 on the marketing, distribution or sale of contracts for differences to retail clients (OJ L 272, 31.10.2018, p. 62). 5 European Securities and Markets Authority Decision (EU) 2019/155 of 23 January 2019 renewing the temporary restriction on the marketing, distribution or sale of contracts for differences to retail clients (OJ L 27, 31.1.2019, p. 36). 6 European Securities and Markets Authority Decision (EU) 2019/679 of 17 April 2019 renewing the temporary restriction on the marketing, distribution or sale of contracts for differences to retail clients (OJ L 114, 30.4.2019, p. 22). 7 Commission Delegated Regulation (EU) 2017/567 of 18 May 2016 supplementing Regulation (EU) No 600/2014 of the European Parliament and of the Council with regard to definitions, transparency, portfolio compression and supervisory measures on product intervention and positions (OJ L 87, 31.3.2017, p. 90).

3 providers authorised in Slovenia providing their services in the Union and will closely monitor the market during that time period. (10) Furthermore, the ATVP shares the reasons given in ESMA’s measures that the existing applicable regulatory requirements under Union law, which have not changed since the adoption of ESMA’s measures, do not address the concern. The ATVP also considers that improved supervision or enforcement of the existing requirements would not better address the concern identified. In particular, the ATVP informed ESMA that it has taken into account the supervisory and enforcement experiences of other NCAs as referred to in ESMA’s measures and that its supervisory practices take into account the relevant guidance provided by ESMA, including the ‘Opinion on MiFID practices for firms selling complex products’ (8 ), the ‘Opinion on structured complex products – good practices for product governance arrangements’ ( 9 ) and the ‘Joint Position of the European Supervisory Authorities on manufacturers’ product oversight and governance processes’ (10). Nonetheless, the ATVP considers that the significant investor protection concern continues to exist. (11) Moreover, the ATVP shares the analysis on proportionality in ESMA’s measures and, in particular, has concluded that the national measures are proportionate taking into account the nature of the risks identified, the level of sophistication of investors or market participants concerned and the likely effect of the action on investors and market participants. In the case of one-off costs, the ATVP considers that, as the national measures are the same as ESMA’s measures, any one-off costs that may be incurred by product providers to comply with the national measures are likely to be minimal. (12) The ATVP considers that the national measures do not have a discriminatory effect on services or activities provided from another Member State as the measures provide for equal treatment of the marketing, distribution or sale of the products regardless of the Member State from which those services or activities are carried out. (13) Since other NCAs have taken similar national measures to consistently address the significant investor protection concern, the ATVP considers that other Member States are not significantly affected by its measures. Furthermore, the ATVP observed that there are currently no CFD providers authorised in Slovenia providing their services in the Union and that the ATVP will closely monitor the market. The ATVP has also notified ESMA and the other NCAs of the national measures not less than one month before they are intended to take effect. (14) The ATVP considers that the national measures do not pose a serious threat to the orderly functioning and integrity of the national physical agricultural market. In particular,

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ESMA/2014/146.
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ESMA/2014/332.
10 JC-2013-77.

4 the ATVP considers that the national measures are the same as ESMA’s measures and that ESMA consulted the national public bodies competent for the oversight, administration and regulation of physical agricultural markets under Council Regulation (EC) No 1234/2007 (11). None of those bodies raised any objections to ESMA Decisions (EU) 2018/796, (EU) 2018/1636, (EU) 2019/155 or (EU) 2019/679.
2. Whether the national measures are justified and proportionate
(15) The significant investor protection concern raised by the offer of CFDs to retail clients led to the adoption of ESMA Decisions (EU) 2018/796, (EU) 2018/1636, (EU) 2019/155 and (EU) 2019/679. However, ESMA’s measures were temporary. According to the information provided by the ATVP, the significant investor protection concern raised by these products continues to exist at national level and needs to be addressed on a longer￾term basis to avoid the detrimental consequences that would arise from their unrestricted offer to retail clients. (16) With regard to the planned date for the national measures to take effect, ESMA has taken into account the reasons provided by the ATVP on the very limited risk that unrestricted CFDs could be offered to retail clients before that date as well as the capacity of the ATVP to adequately monitor the market during that period and act as necessary. (17) As the national measures are the same as ESMA’s measures, ESMA has taken into account the reasons for ESMA’s measures referred to by the ATVP as well as the additional information and reasons given by the ATVP. Based on this information, ESMA is satisfied that the national measures are justified and proportionate.
3. Whether the taking of a measure by other competent authorities is necessary
(18) For the reasons explained in ESMA’s measures, the significant investor protection concern raised by the offer of CFDs to retail clients is a cross-border issue. As evidenced by practices to date, product providers are able to offer these products through online trading accounts and passport their services throughout the Union. To effectively address the significant investor protection concern and avoid the risk of regulatory arbitrage, it is essential that product providers cannot exploit differences in treatment by NCAs across Member States. Since the expiry of ESMA’s measures, product providers may again seek to offer such products in or from a Member State that has not taken a measure at least as stringent as ESMA’s measures. Therefore, it is essential that NCAs take concerted action to address this risk.

11 Council Regulation (EC) No 1234/2007 of 22 October 2007 establishing a common organisation of agricultural markets and on specific provisions for certain agricultural products (Single CMO Regulation) (OJ L 299, 16.11.2007, p. 1).

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4. Conclusion
(19) In conclusion, ESMA is of the opinion that:
(a) the national measures are justified and proportionate; and (b) it is necessary for the NCAs of other Member States to take product intervention measures that are at least as stringent as ESMA’s measures. This opinion will be published on ESMA’s website in accordance with Article 43(2) of Regulation (EU) No 600/2014. Done at Paris, 23 August 2019 For the Board of Supervisors Steven Maijoor The Chair