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Luxembourg bans binary options and toughens CFDs regulation

Maya Mandz | Jun. 27, 2019
Luxembourg bans binary options and toughens CFDs regulation

June 27, 2019 | AtoZ Markets - Commission de Surveillance du Secteur Financier (CSSF) of Luxemburg has confirmed it would adopt recently introduced European product intervention measures. Along with putting restrictions on contracts for difference Luxembourg bans binary options. 

Luxembourg bans binary options following new ESMA market rules

The financial watchdog of Luxemburg addressed the retail trading community in two separate statements. The official note says, that from July 1, 2019, CSSF will bring in a temporary ban on these binary options’ trades alongside controls on margin trading.

The watchdog also imposed restrictions on the sale of contracts for difference (CFDs), which will come into force from August. The new initiative will reportedly enable regulators to filter out such risky trading products as binary options and decrease consumers’ financial loses. 

Luxembourg bans binary options, who is next 

ESMA restrictions around binary options and CFDs were initially supposed to be temporary. However, the national financial regulators announced tougher permanent rules, escalating its action against two industries that they argue most consumers lose money on its complex products.

In a recent couple of months, at least three national financial regulators have proposed their product intervention measures, which similar to the ESMA rules introduced in August 2018.

And this number is, probably, going to grow. The Polish Financial Supervision Authority (KNF) has recently confirmed a permanent ban on binary options in Poland come 2 July 2019. The Central Bank of Ireland confirmed imposing a ban on binary options and CFD’s restrictions across the country a few weeks ago. UK, Holland, Denmark, and Germany also imposed a ban on binary options and put restrictions on CFDs. The binary options and CFDs are supposedly reaching their dead end in Europe. 

Luxembourg bans binary options, who wins? 

The new product intervention measures introduce tiered leverage for retail clients, dropping CFDs on major pairs to 30: 1 while other CFDs shrink to 20: 1. Commodities and non-major indices trade with 10: 1 or lower leverage while cryptocurrencies take the biggest hit, dropping to 2: 1.

The new rules also prescribe negative account protection, ensuring that customers cannot lose more than their trading share.

Finally, the rules will prohibit bonuses and other incentives. According to experts, if Luxembourg bans binary options, this could be another blow to the online trading sector, since these speculative trading products are popular with their retail customers. The media reports, that ESMA product intervention measures have already damaged the profitability of large British brokers such as IG Group and CMC Markets.




Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.