Esma-Eba warning on contracts for difference

The ESMA (European Securities and Markets Authority), in which Consob is also involved, and the EBA (European Banking Authority), the European authority for the regulation and monitoring of the banking business, over the last few days have published a warning for investors on the potential risks of investing in derivatives referred to as "contracts for differences (CFDS)".

The warning of the two European authorities asks investors to be cautious who, particularly at times of crisis with low returns on financial investments, they may be tempted to invest in complex financial products without fully understanding the risk-return profiles. Only those who are well aware of the function of these products should use them, who have experience in trading on volatile markets and sufficient time to monitor investment trends.

The authorities recommend reading the contract carefully before signing it and being certain of understanding the main characteristics (e.g. costs, intermediary margin, mechanism whereby the intermediary determines the market price, consequences of any positions that may have remained "open" at the end of the day, any market price oscillations between order entry and its fulfilment). Further advice, as always, regards the verification that the bidder is authorised to operator in the investor's country.

The warning is available from the website www.esma.europa.eu.

(in Consob Informa n. 10/2013 - 11 March 2013)