ESMA Extends Binary Options Trading Ban

ESMA extends Binary Options trading ban, according to the latest announcement on its website. The regulator has noted that not all of the Binary Options products will see the extension of the ban.

24 August, AtoZ Markets At the beginning of January 2018, the EU markets have seen the enactment of the new regulatory framework for financial institutions. Following the regulatory implementation, the pan European watchdog ESMA has imposed some of the regulatory limitations on the marketing, distribution and sale of CFDs and binary options for brokers. 

ESMA Extends Binary Options Trading Ban

In July of the current year, the temporary ban on offering Binary Options trading products in the EU has been put into effect. It was supposed to stay in place until October 1. However, the latest announcement from ESMA suggests that the regulator plans to extend the ban for at least three months more through January 2019. 

However, the regulator has noted that some type of longer-dated Binary options would be exempt from the ban. The regulator mentions the following Binary Options:

  • a binary option for which the lower of the two predetermined fixed amounts is at least equal to the total payment made by a retail client for the binary option, including any commissions, transaction fees, and other related costs; and
  • a binary option that meets cumulatively the following three (3) conditions: 
  • (a) the term from issuance to maturity is at least ninety (90) calendar days;
  • (b) a prospectus drawn up and approved in accordance with the Prospectus Directive (2003/71/EC) is available to the public; and
  • (c) the binary option does not expose the provider to market risk throughout the term of the binary option and the provider or any of its group entities do not make a profit or loss from the binary option, other than previously disclosed commissions, transaction fees or other related charges.

ESMA Forex and CFDs Regulations

Moreover, talking about ESMA’s regulations regarding the temporary limit on leverage on Forex and Contracts for Difference (CFD) products, the regulator did not mention anything in today’s press release. These regulations have come into effect earlier this month, on August 1. It is expected that they will be in place until the 1st of October. 

For CFDs and Forex products, the ESMA has introduced a tiered leverage in several tiers. The EU supervisor decided to set out 30:1 leverage for CFDs on major Forex pairs, with non-major currency pairs and gold to be traded at 20:1, while other commodities and non-major indices will be given a 10:1 gearing. Likewise, ESMA laid out a 5:1 leverage for individual equities and 2:1 leverage for cryptocurrency trading.

Coming back to today’s ESMA announcement, the regulator has added the following: 

“ESMA intends to adopt the renewal measure in the official languages of the EU in the coming weeks, following which ESMA will publish an official notice on its website.”

It also noted that it will publish the measure in the Official Journal of the EU. The measure will be applicable from 2 October 2018 for a period of three months.

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