IG Group (LON:IGG) shares fell over 10 percent on Monday morning, after the European Securities and Markets Authority announced the possible introduction of a ban on the sale of binary products to retail investors.
On Friday ESMA said it had been “concerned about the provision of speculative products such as CFDs, including rolling spot forex, and binary options to retail clients for a considerable period of time”, adding that it had “conducted ongoing monitoring and supervisory convergence work in this area”.
Due to this, it said it was looking at prohibiting the marketing, distribution or sale to retail clients of binary options and and restricting the marketing, distribution or sale to retail clients of CFDs. ESMA also said it was looking at dramatically reducing CFDs leverage limits to levels lower than previously laid out by Britain’s Financial Conduct Authority.The FCA said it was in agreement with these proposals.
Firms selling the products were less pleased however, with their share prices taking a hit on Monday morning. CMC Markets fell by 13 percent and Plus500 by 11 percent on the news. IG Group said in a statement on Monday morning:
“The leverage restrictions under review are disproportionate and go beyond what is needed to protect consumers from poor outcomes associated with excessive leverage.
“The danger of disproportionate leverage restrictions on regulated firms is the risk that they will push retail clients to trade CFDs with unregulated firms based outside the EU potentially resulting in poor client outcomes.”
IG Group’s share price is currently trading down 10.10 percent at 659.00 (1043GMT).