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European Securities and Markets Authority (ESMA)

Posted on 2023-05-01

The European Securities and Markets Authority (ESMA) is an independent EU Authority that contributes to safeguarding the stability of the European Union's financial system by enhancing investor protection and promoting stable and orderly financial markets. ESMA achieves this by working closely with the national competent authorities (NCAs) of the EU member states, as well as with the European Systemic Risk Board (ESRB) and the European Banking Authority (EBA).


ESMA's responsibilities include the development of technical standards and guidelines for EU financial markets, the promotion of supervisory convergence, and the provision of advice to the EU institutions on financial markets legislation. ESMA also supervises credit rating agencies (CRAs) and trade repositories (TRs), as well as conducts risk assessments and market monitoring activities.

In terms of regulating Forex trading, ESMA has issued several measures to enhance investor protection and harmonize the regulatory framework across the EU member states. For example, ESMA has imposed leverage limits on Forex trading, which limit the amount of leverage that Forex brokers can offer their clients. ESMA has also introduced requirements for negative balance protection, which ensures that clients cannot lose more than their account balance in the event of market volatility.

ESMA has also implemented measures to enhance transparency and fairness in Forex trading, such as requiring Forex brokers to disclose their order execution policy and publish data on the quality of their execution. ESMA has also banned certain trading practices, such as offering bonuses to clients for depositing funds or engaging in high-frequency trading.

Overall, ESMA plays a critical role in promoting a level playing field for Forex traders across the EU and enhancing investor protection in the Forex market.

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