"Barbie Client" in Spain

In the 2023 film "Barbie," Barbie's perennial male rival, Ken, "imports patriarchy into" Barbie Land, "using only imagery related to beer and horses, successfully getting (almost) all Barbie dolls to give up their ideas and become submissive, Ken-serving characters。It wasn't until a real-world woman delivered a heartfelt speech that the Barbies came to their senses, rejected patriarchy and returned to their original female clan lifestyle。

According to the Spanish financial regulator CNMV, as quoted in the July 10, 2023 ESMA opinion, Spanish retail customers are like Barbie dolls when it comes to CFDs: certain market participants use aggressive and sometimes illegal marketing tactics to persuade "Barbie customers" to invest large amounts of money in CFDs - although according to ESMA and CNMV, these products are often not good for them.。

With no heroes appearing to break the Spanish 'Barbie client' CFD spell, CNMV has decided to ban remarks about 'Barbie clients' and CFDs altogether。From now on, no one is allowed to mention the existence of CFDs to "Barbie customers" (unless the "Barbie customers" themselves request the data and the provider is required by law to share the data。

These measures go beyond any previous measures by the ESMA or other EU national regulatory authorities (NCA) to limit fundamental rights and are comparable to cigarette advertising bans.。Therefore, there are no strong enough points in ESMA's decision。

1.Deprivation of the right to freedom of expression

The decision restricts several fundamental rights, most notably freedom of expression, which is consolidated in article 1.。Article 11 of the European Charter of Fundamental Rights:

"Everyone has the right to free speech.。This right shall include freedom to hold opinions and to receive and disseminate information and ideas without interference from public authorities and without regard to borders。"

Other fundamental rights that one can claim to be affected by the decision are the freedom to choose a career and the right to work (art. 15), the freedom to conduct business (art. 16) and the right to equality before the law (art. 20) (as these measures apply only to retail customers in Spain and not to other customers in the EU)。

Nevertheless, the word "freedom" appears only once in the ESMA's 20-page decision, in the context of "freedom to provide services" in all EU member states.。The decision does not allow for a real discussion of the restricted fundamental rights and their impact (for example, on investment companies)。

Let's say you are a provider of some kind of legal product and you have sold it legally, but now you are asked to stop within a month。This could mean you need to close the call centre, lay off staff, or even shut down the company altogether, and you may not even be allowed to mention CFDs in your conversations with customers.。Do you think the prohibition decision should be discussed through related issues such as the impact of rights？

2.Ignoring the State of the Union

Another element missing from the decision is a more in-depth discussion of the regulatory differences it has created within the EU (as these measures apply only to Spanish retail customers)。ESMA noted that other NCAs had been notified and consulted, but did not give any weight to the additional costs and inefficiencies resulting from regulatory disagreements, nor did it take into account that these measures appear to be contrary to the concepts of the European Single Market and EU Financial Union policy.。

ESMA also mentioned that "national measures are not considered to have discriminatory effects" because they apply equally regardless of which member state they are supplied from, and they are intended to address specific issues identified by the CNMV.。However, when the Spanish regulator said it would allow its regulated entities to do things to others that it would not allow to do to itself, one could not help feeling a bit uncomfortable.。In this regard, it is worth noting the document issued by the AMF in January 2022, in which they proposed the exact opposite of the CNMV, that regulatory powers be granted based on the location of the end customer rather than the location of the financial institution.。

While the ultimate goal is to protect investors, this should be achieved through centralized thinking, greater coordination and digitalization to ensure the safety and health of the single market.。However, the CNMV's measures appear to be a step in the opposite direction - not toward the single market, but toward markets in individual states.。

3.Low data reliability

Correct decisions should depend on reliable data。The data provided in the decision is 2-3 years old, and it is also somewhat one-sided, based in part on estimates。In a dynamic, data-driven industry like capital markets, this seems rather lacking。

In addition, the data provided do not necessarily support these measures。For example, according to CNMV, the average loss per retail customer trading CFDs is 1,649-7,269 euros, while the total loss is more difficult to estimate, and out of the annual CFDs trading volume of 155 billion euros in 2021, the total loss appears to be about 1.€700 million (about 0.1%)。

Despite the large numbers, about 1 per year.Would a €700m loss pose a risk to the integrity of Spain's financial markets？The average loss per customer is thousands of euros, and the total loss is about 0.1%, does it indicate mass deception, misinformation, and customer stress？To us, given the high-risk nature of the product, that doesn't sound too "clear-cut."。This is of course up to the regulator, but the decision does not include a discussion of this rather fundamental issue。

Reflection on the style of "everyone long"

Of course, we would love for regulators to act to protect investors, and a degree of paternalism and restrictions on rights are inherent in the regulator's role。However, measures to limit fundamental rights deserve a broader discussion around the above points。Especially when these measures go beyond the previous, measures similar to those enacted by law。

How the final outcome of these measures is difficult to predict。Will they reduce CFD trading for Spanish retail customers?？may inadvertently direct them to other jurisdictions, and most likely to jurisdictions outside the EU。Will companies now focus on how to choose customers from retail customers to professional customers in order to market CFDs to them?？This is likely to be the next topic of discussion。

In principle, we believe that the best course of action is not prohibition, but education and supervision。If regulators claim that marketing practices impede free will, it seems paradoxical to do the opposite and ban education。