Regulations Round Up – November 2020

October was a tough month for the financial market as US stimulus and covid-19 vaccine remained evasive. At the same time, more countries, including those in Europe started to report a surge in coronavirus cases. Behind the scenes, regulators were assessing the state of the market and updating their rules. As a leading financial services marketing agency, our team has rounded up the top regulation updates that happened in October and what lies ahead for November 2020.

ASIC puts more pressure on CFD brokers

In October, the Australian Securities and Investments Commission (ASIC) released new guidelines on Contracts for Difference (CFDs). The goal of these measures is to protect customers by limiting the risky products offered to them. These new measures will start in March 2021. Some of the regulations are limiting the leverage of major currency pairs to 30:1.

The maximum leverage for minor currencies, gold, and indices will be 20:1 while that of other commodities, cryptocurrencies, and shares will be 10:1, 2:1, and 5:1, respectively. These leverages are similar to those required under the European Union’s MIFID-II regulations. Other sections in the new ASIC laws are protection against negative balance, marketing limitations, and standardising margin requirements.

ESMA final position on share trading obligations

In October, the European Securities and Markets Authority (ESMA) released a public statement about the application of the European Union’s trading obligations for shares (STO) after the UK leaves the European Union. The main section in the new rules is that trading of shares with a European Economic Area in the UK using sterling will not be subjected to the STO. The goal of this clarification was to provide certainty about the financial market situation when the UK finally moves from the EU on December 31st. The statement said:

“SMA regards that such trading by EU investments firms occurs on a non-systematic, ad-hoc, irregular and infrequent basis. Therefore, those trades will not be subject to the EU STO, under Article 23 of MiFIR.”

SEC considers crypto ETFs

In the past few years, the Securities and Exchange Commission (SEC) has refused to accept crypto exchange-traded funds. Notably, the regulator declined an ETF created by VanEck, a leading financial services company. Franklin Templeton has also submitted papers on its ETFs. In October, SEC chair, Jay Clayton said that the regulator was now working to understand these ETFs. He said:

“Our door is wide open — if you want to tokenise the ETF product in a way that adds efficiency, we want to meet with you and we want to facilitate that. Of course, you have to register it and do what you would do with any other ETF.”

Ripple considers moving to London

Elsewhere, Ripple, owner of the largest crypto in the world revealed that it was considering moving its headquarters to London. In a statement, the firm’s CEO cited the fact that the Financial Conduct Authority (FCA) does not consider XRP a security. That is in contrast to US regulators, who view it as a security. He said:

“What you see in the U.K. is a clear taxonomy, and the UK’s FCA took a leadership role in characterizing how we should think about these different assets and their use cases. The outcome of that was clarity that XRP is not a security and is used as a currency. With that clarity, it would be advantageous for Ripple to operate in the U.K.”

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