European Securities and Markets Authority
|Formed||1 January 2011|
ESMA replaced the Committee of European Securities Regulators (CESR) on 1 January 2011. It is one of the three new European Supervisory Authorities set up within the European System of Financial Supervisors.
ESMA works in the field of securities legislation and regulation to improve the functioning of financial markets in Europe, strengthening investor protection and co-operation between national competent authorities.
The idea behind ESMA is to establish an "EU-wide financial markets watchdog". One of its main tasks is to regulate credit rating agencies. In 2010 credit rating agencies were criticized for the lack of transparency in their assessments and for a possible conflict of interest. At the same time, the impact of the assigned ratings became significant for companies and banks but also states.
In October 2017, ESMA organised its first conference which was held in Paris. The event examined issues critical to European financial markets and was attended by 350 participants.
The first company that became fully compliant with new ESMA regulations was London-based fintech startup capital.com.
ESMA's Product Intervention Measures
On 1 August 2018, the ESMA implemented modified trading restrictions concerning contracts for difference (CFDs) and spread betting for retail clients. The most significant change was that binary options will be completely banned while the CFD leverage that retail clients can trade with will be restricted to 30:1 and 2:1, depending on the volatility of the underlying asset traded. These restrictions applied to traders categorized as retail investors only. Experienced traders, which fall under the category of professional clients, were excluded. This also meant that professional clients did not receive the same investor protections as retail investors. The restrictions, initially imposed as a temporary measure, were renewed on 1 February 2019 for a further three-month period. On 31 July 2019, the ESMA announced that it will not renew the restrictions after they expire on 1 August 2019, as all the EU member countries have managed to implement similar restrictions on national level.
Questions and Answers (Q&A)
To ensure the consistent day-to-day application of Union law within ESMA's remit, one of the organisations' key contributions is the production and maintenance of Q&As. To open the process, ESMA launched in February 2017 a new process allowing stakeholders to submit a Q&A. Once scrutinised, if these Q&As are selected, they are published in English on ESMA's website.
- Capital Markets Union
- Banking Union
- MiFid II
- European Supervisory Authorities
- European Banking Authority
- European Insurance and Occupational Pensions Authority
- "EUROPA – Press Releases – A turning point for the European financial sector". Europa.eu. 1 January 2011. Retrieved 24 April 2011.
- "EU plans new financial regulator for rating agencies". BBC News. 2 June 2010. Retrieved 18 April 2014.
- "Steven Maijoor on the State of European Financial Markets". www.esma.europa.eu. Retrieved 11 October 2018.
- "Capital.com is the first CFD provider to be fully compliant with ESMA regulations". Fintech Finance. 4 June 2018. Retrieved 3 December 2018.
- "ESMA ADOPTS FINAL PRODUCT INTERVENTION MEASURES ON CFDS AND BINARY OPTIONS". Europa.eu. 1 June 2018. Retrieved 10 August 2018.
- "ESMA's product intervention measures in relation to CFDs and binary options offered to retail investors" (PDF). Europa.eu. 27 March 2018. Retrieved 18 August 2018.
- "ESMA to renew restrictions on CFDs for a further three months from 1 February 2019". www.esma.europa.eu. Retrieved 26 February 2019.
- "ESMA ceases renewal of product intervention measures relating to contracts for differences". www.esma.europa.eu. Retrieved 10 September 2019.
- "Questions and Answers". www.esma.europa.eu. Retrieved 13 September 2019.