The World Federation of Exchanges Asks the FCA Not to Ban the Sale of Crypto Derivatives to Retail Investors
London - October 7, 2019 (Investorideas.com Newswire) The World Federation of Exchanges ("WFE"), the global industry group for exchanges and CCPs, has asked the Financial Conduct Authority ("FCA") not to ban the sale of crypto derivatives to retail consumers while supporting the regulator's desire to better protect vulnerable consumers.
The FCA consulted the industry on measures to protect investors, who may seek to buy crypto-based futures, options, and contracts for difference and exchange-traded notes. In its response, the WFE emphasised its desire to help find the right balance between enabling innovative products to be traded in the UK, and ensuring that they are sold responsibly, by fully regulated providers. The WFE recognises the volatility identified by the FCA in its consultation report and is supportive of ensuring that proper consumer protection is put in place as a priority for any new and relatively untested product on the market.
The WFE cautioned, however, that an outright ban, under current proposals, would envelop regulated exchanges and CCPs who operate under stringent regulations to provide pre- and post-trade risk management standards which are designed to foster safe and efficient markets.
The WFE made the following recommendations:
- That regulators give consideration to the underlying market structures; the structure of established, fully regulated exchange and CCP operators significantly diminishes the risk profile for retail investors participating in these markets.
- That there is caution in applying the same measures to exchange-traded and centrally cleared derivatives as to underlying crypto asset markets, as this could create unintended consequences.
- That options to mitigate excessive risk exposure for retail consumers should be pursued alongside the potential introduction of ‘standards' for such products, particularly as the crypto market is evolving and maturing.
- A review on the ban (should it be implemented) as the market evolves for the purposes of ensuring consumer choice and access. This review is also designed to avoid international market fragmentation, particularly if international standard setters introduce a new global regulatory approach to the regulation of crypto assets.
Nandini Sukumar, Chief Executive Officer, WFE said: "Consumer protection must be foremost when seeking to regulate new and innovative products. While crypto asset products have real potential, the market has suffered from unregulated providers distributing inappropriate products. Market infrastructures that adhere to strict regulatory requirements, embed consumer protection as part of their mandate and understand that integrity is fundamental to well-functioning markets, are best placed to deliver these products and support the developing marketplace. We ask that authorities, including the FCA, chart the right regulatory course to allow the market to flourish and benefit its consumers even as we understand that it's a balancing act."
You can read the WFE response in full here.
About the World Federation of Exchanges (WFE):
Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 200 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 37% are in Asia-Pacific, 43% in EMEA and 20% in the Americas. WFE exchanges are home to nearly 48,000 listed companies, and the market capitalisation of these entities is over $70.2 trillion; around $95 trillion (EOB) in trading annually passes through the infrastructures WFE members safeguard (at end 2018).
The WFE is the definitive source for exchange-traded statistics, and publishes over 350 market data indicators. Its free statistics database stretches back more than 40 years, and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities' goals of ensuring the safety and soundness of the global financial system.
With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system.
For more information, please contact:
Head of Communications, The World Federation of Exchanges
Phone: +44 20 7151 4137 / 7850 287 685
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