Key points include:

• Scope of measures: Derivatives meeting the definition of CFDs are subject to product intervention measures, including:
  • Leverage limits
  • Mandatory risk warnings
  • Margin close-out and negative balance protection
  • Prohibition of monetary and non-monetary benefits
• Product governance: Firms must ensure a narrow target market for these complex products, avoiding mass marketing or campaigns targeting inexperienced investors.
• Appropriateness assessment: For non-advised services, firms must assess whether these products are suitable for retail clients.
• Conflict of interest: Firms must identify and manage conflicts of interest, particularly when derivatives are issued or traded within the same group.
• Legal analysis: Firms must conduct a thorough legal review of products, regardless of their commercial name, to determine if they fall under the scope of these measures.
• PRIIPs regulation: Firms distributing these derivatives to retail clients must prepare a Key Information Document (KID) as required under the PRIIPs Regulation.

ESMA emphasises the importance of acting in the best interests of clients and adhering to investor protection requirements under MiFID II. Firms should align their practices with these obligations to ensure compliance and safeguard retail investors.

ESMA’s news release can be found here and the public statement here