April 01, 2019. | AtoZ Markets - The UK Financial Conduct Authority (FCA) has just confirmed the permanent ban on selling, marketing or distributing binary options to retail customers. The FCA ban on binary options applies to firms that operate in the United Kingdom.
The step was taken upon thorough consultation on the decision for consumer protection purposes.
What stands behind the decision as per resources, is that the regulator had concerns about the inherent risks of these products, in addition to the poor conduct of the firms selling them.
The above-mentioned harmed the UK market, as long as the international one, as per the claims, yielding in significant losses.
The British watchdog argues that the ban on binary options could save retail consumers up to £17 million a year, in addition to reducing the risk of fraud by unauthorised entities that claim to offer these products.
The ban the UK regulator imposed on binary options means that any firm currently claims to be authorized to sell binary options, is definitely a scam.
Not far from the UK stance, the European counterpart, ESMA, has been extending its ban on CFDs and binary options on the basis of three-month period every time.
The European Securities and Markets Authority (ESMA), published today its website, on October 1st, 2018, the notice of ESMA’s product intervention renewal decision in relation to binary options.
However, ESMA still excluded the ‘securitised binary options’ from its ban, wheras the FCA still banned it as well.
The notice detailed the decision that falls under Article 40 of Regulation (EU) No 600/2014 to prohibit the marketing, distribution or sale of binary options to retail clients, which ESMA adopted on the 21st of September this year.
ESMA once referred to that it agreed to renew an additional “reduced character risk warning”, due to the technical difficulties CFD providers experienced in using the risk warnings, because of the character limitations third party marketing providers impose.
Germany had plans to permanently ban binary options too
On November 30, the German Federal Financial Supervisory Authority (BaFin) started a permanent ban on binary options. BaFin gave brokers and clients a period until the 20th of December 2018 to comment on the proposed measures in writing.
According to BaFin, binary options are also very complex and have a non-transparent calculation of the expiration price of the underlying asset. The German financial authority highlights that unlike other financial instruments, binary options are not traded on a market where supply and demand are determining the price. Instead, the price is set out by the provider of the product, which leaves no opportunity for clients to verify the level.
CySEC shares the same fears about binary options
The Cypriot regulator also has the brokers who trade with binary options under its telescope.
Not distant from today, CySEC issued yet another warning with regard to an unlicensed binary options brokerage companies, which were operating outside its regulatory labels.