ESMA: Supervisory briefing – provisions of Copy Trading Services

The European Securities and Markets Authority (ESMA) published last week, a supervisory briefing on firms offering copy trading services, in accordance with its objective of fostering investor protection and actively promoting supervisory convergence across the Union.

This briefing includes guidance on the qualification of copy trading services as an investment service and it sets out supervisory expectations with regard to MiFID II requirements on:
• Information requirements (including on marketing communications and costs and charges)
• Product governance
• Suitability and appropriateness assessment
• Remuneration and inducement
• Qualifications of traders whose trades are being copied

What is copy trading?
Copy trading enables individuals in the financial markets to automatically copy positions opened and managed by other selected individuals. In essence, in copy trading one trader’s positions are copied by another trader’s account.

You can read the Supervisory briefing on supervisory expectations in relation to firms offering copy trading services here ESMA Supervisory Briefing