Hidden points behind CONSOB Binary Options trading Risks announcement

More and more regulators are clamping down on the binary options industry, with the latest regulator being CONSOB which sent out a warning. Yet, what are the hidden points behind CONSOB Binary Options trading Risks announcement?

14 February, AtoZForex  After the CySEC has proposed new Binary Options reforms on Monday, Italy’s regulator CONSOB issues a Binary Options trading warning. Aimed at the investor protection, CONSOB published about the risks associated with trading in binary options, rolling spot forex, and contracts for difference (CFDs).

The Commission also mentioned such tradable assets as highly-speculative, risky and complex forms of financial investment. CONSOB stated that it has limitation in direct powers of supervision and/or intervention in relation to the intermediaries.  It has already taken steps in extenuating trader losses.

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Details of CONSOB Binary Options trading Risks announcement

The Commission noted that brokers usually offer such instruments through particularly aggressive commercial practices and misleading advertisements.  Investors accept them without a real understanding and assessment of the effective scope of the risks that it entails.  Moreover, this form of investment can cause losses even much greater than the initially invested capital.  Therefore, investors should avoid trading in such instruments until they understand and assess all associated risks.

According to the Commission, over the last few years CFDs, binary options, and spot forex have spread enormously in the various EU countries, including Italy.  Nearly all brokers offering such instruments in the country either are based in any other EU country or operate via a secondary office in Italy.

Trading in these instruments remains risky even with a licensed broker.  However, dealing with non-authorized brokers is even more risky.  Disputes with regards to such instruments between EU investment firms and investors without an Italian branch cannot be taken to the new Arbitrator for Financial Disputes (AFD), recently set up at CONSOB.

Italy is joining hands with other EU institutes

Italy is joining a growing list of EU member states that are fighting against binary option trading.  These instruments have become very controversial recently.  EUROPOL held a binary options summit on January 24th of this year.

In August of last year, Belgium banned the distribution of over-the-counter (OTC) binary options, spot forex, and CFDs via online channels with leverage.  France has also banned the online advertisement of these instruments especially binary options with a leverage greater than 1:5.  In addition, Germany and Netherlands have also announced the ban on advertising of such instruments.

Moreover, the Israel Securities Authority (ISA) recently announced that they are preparing legislation amendments to address the binary options issue. This came after European regulators raised concerns that the country’s policies regarding binary options are lux.  The EU regulators demanded industry across Europe, including Israel, should be shut down.

In the United States, trading in such instruments is restricted to on-exchange execution only (via Nadex or Cantor Exchanges). Meanwhile, Quebec’s Autorite des Marches Financiers (AMF) proposed the prohibition of the sale of binary options. Becoming the first Canadian province to implement a full ban on this type of instruments.

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