ESMA lifts ban on binary options in the Europian Union

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ESMA did not extend the ban on binary options trading in the European Union

July 1, it became known that ESMA ceases its temporary ban on marketing, advertising and the sale of “binary options” for retail customers from the European Union. Definitely, this is a mutual reason for joy for both unprofessional traders and trading platforms from the European Union. Advertising, like the most binary options, was inaccessible to ordinary traders with the EU for a long time. Professional traders had access to the binary options of the EU. But, especially from the latter, they did not hear anything whether there were difficulties and who fell under the classification of professional traders. Many of the platforms, according to the bad tradition that took place in the field of binary options, refused to follow the decree of the regulator. And they were left without a license. Many chased at all. In general, this was not news for the industry, but innocent traders and options have suffered. But, traders who remember the “Israeli stage” of binary options were not very surprised by this turn of events.

What has changed during this time in the binary options industry

Analyzing many other sources of information, we can highlight a positive trend in the field of binary options. Old projects were chipped, not so many new players appeared on the market. Most of them have become more conscientious about their customers (traders). Trading has now become much more relaxed even outside the European Union. The market was redistributed among large companies that occupy leading positions in this industry. It should be noted the growing interest in binary options from Latin America, Indonesia, Thailand, China and other countries of the world. Earlier, the popularity of options was concentrated to a greater extent in the countries of the European Union and the CIS. Now, in the light of recent events, we see a good upward trend in the options market around the world. Many analysts fear deja vu amid past events. But, such a scale as before will not be. Traders have become more vigilant and more careful about choosing a trading platform.

The real situation after the lifting of the ban on binary options in the European Union

First of all, it should be noted that none of the major brokers is in a hurry to return binary options for the EU countries. They were successfully replaced by FX options, which became an alternative for many traders. They did not manage to get wide distribution. Affordable forex options are still available at several major brokers. Some time later, after the ban was officially lifted, we did not notice that trading platforms began again to offer binary options trading to traders from EU countries. We will keep track of this moment in the future. Nevertheless, we hope that after a long pause, binary options will begin to return to the European Union in small steps. In the meantime, there are many other trading tools that have managed to replace options for many traders during their absence. The long return of binary options to the European Union is also evidenced by the low interest of potential traders in search engines. All these factors influence the return of many beloved trading instruments to Europe by many.

ESMA is watching you

The official lifting of the ban on binary options has not caused much excitement, as many expected. Everyone knows the cool temper of this regulator. First, hold the toy in your hands, and then pick it up. In its official publication, ESMA made it clear that it will continue to monitor this trading instrument and tighten control over it. Such a trial period, which is not defined by the time frame. What will happen from this – directly depends on binary options brokers. To be honest, from the good faith of the latter. If everything goes well, then binary options have a very good chance to return with new forces to the European market. Will it be? It all depends on brokers to a greater extent and the awareness of most traders. With their increased vigilance to brokers, fraudsters will find it very difficult. Their life cycle will become very short. With the assistance of ESMA, we will get a good bunch to limit the influence of such companies on the authority of a trading instrument.

Conclusion

I would like to note a positive trend in all of the above. After all, we will witness a new stage in the development of binary options as a trading tool. If everything goes smoothly and in the EU, trading platforms will return binary options for trading to ordinary traders. And, this will not cause negative consequences, the growth and popularity of this trading instrument will increase significantly. And, as it really will be, time will tell. Follow binary options with us. We have a lot of useful information on the site. See you in new publications.

“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”

ESMA lifts ban on binary options in the Europian Union

The European Securities and Markets Authority (ESMA) has agreed to renew the prohibition of the marketing, distribution or sale of binary options to retail clients, in effect since 2 July 2020, for a further three-month period.

ESMA has carefully considered the need to extend the intervention measure currently in effect. It considers that a significant investor protection concern related to the offer of binary options to retail clients continues to exist. ESMA has therefore agreed to renew the measure from 2 April 2020 on the same terms as the previous renewal decision that started to apply on 2 January 2020.

The renewal was agreed by ESMA’s Board of Supervisors on 14 February 2020.

Next steps

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. The measure will then be published in the Official Journal of the EU and will start to apply from 2 April 2020 for a period of three months.

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ESMA lifts ban on binary options in the Europian Union

The European Securities and Markets Authority (ESMA), the EU securities markets’ regulator, will not renew the temporary prohibition of the marketing, distribution or sale of binary options to retail clients in the European Union (EU).

ESMA has taken product intervention measures regarding binary options, imposing a temporary prohibition on their marketing, distribution or sale, in Decisions (EU) 2020/795, (EU) 2020/1466, (EU) 2020/2064 and (EU) 2020/509. If the temporary prohibition is not renewed again, the currently applicable measure in ESMA Decision (EU) 2020/509 will automatically expire at the end of the day on 1 July 2020.

As most national competent authorities (NCAs) have taken permanent national product intervention measures relating to binary options that are at least as stringent as ESMA’s measure, ESMA will not renew its temporary prohibition.

ESMA will continue to monitor activities in relation to these and other related speculative products to determine whether any other EU-wide measures may be needed.

Ban – How To Avoid The ESMA Ban On Binary Options

A ban on binary options has been in place since 2nd July 2020 in Europe. The European regulator, ESMA placed a temporary ban on binaries and have maintained it ever since. EU Traders can avoid the ban however, and continue trading. So what are the options for traders impacted by the ban?

Binary Ban Explained

The European Securities and Markets Authority (ESMA) implemented a ban on binary options in July 2020. They were convinced that this measure would protect consumers and resolve the deluge of complaints they had received over the previous decade.

The number of frauds linked to binary options was huge, and rather than prosecute the scams, ESMA decided instead to simply halt the supply and marketing of binary options “to retail traders”.

The ban was originally implemented temporarily, for three months. It also coincided with restrictions on CFD and Forex trading in Europe.

Extension

Since the original ruling, both the ban on binary options and the related restrictions have been extended:

  • From 1st July 2020 to the 1st of October
  • Then from October to the 1st January 2020
  • And again from January to 1st April 2020.
  • On February the 18th 2020, ESMA confirmed they would extend the ban again, this time to 1st June 2020

During this period, very little in the way of research has been done by ESMA, to see how effective the ban has been. For example, the original scams were already breaking the law – so have they adhered to the ban? The simple answer to that is “no”. They have however, branched out into cryptocurrencies – another area where regulators are years behind.

The official text on each extension has been exactly the same, bar the dates. This suggests very little thought has gone into the extensions and they are a simple ‘cut-and-paste’ press release.

With that said, it seems certain that the ban will remain in place, restricting the availability of binary trading to traders in the EU. So what can traders do?

How To Avoid The Ban

Traders actually have a few choices when it comes to trading from within the EU. There are positives and negatives to all of them, but it is possible for traders to carry on, and that is the important thing.

Firstly, trading with an unregulated broker that still accepts EU traders is to be avoided at all costs. One side-effect of the ban is that many consumers have been inadvertently ‘pushed’ towards unregulated firms. This is not a safe route. Here are some methods to continue trading in a safe, legal way.

Alternative Products

Many reputable brokers have created new products to fill the gap left by the ban. IQ Option created FX Options and IG offer Knock-outs for example. While these are not strictly ‘binaries’, they share many traits and similar strategies will work on both.

Brands are looking at new products all the time, so look out for marketing information.

Non-EU Branches

One less well known choice for traders, is to move their account to a regulated arm of their existing broker. That is right, you might be able to carry on with your existing broker…

There are two key points here. Firstly, this is only possible where the broker has multiple regulated brands, in other words, separate brands in each jurisdiction (or off-shore). For example. Some brands have different registered companies, regulated separately – “XXX Europe Ltd” for example, but with “XXX Malaysia Ltd” as well.

It is possible for you to request an account with the Non-EU or off-shore branch of the business. ESMA allow this to happen – but brands are not allowed to market the possibility. The request has to come from the trader, and not be prompted by the firm themselves or marketing sources.

Use A Professional Account

This choice will only be available to certain traders. Basically, if a trader registers as a professional, they are saying they are experienced enough to trade high risk / high reward products like binaries, and acknowledge that in doing so, they give up regulatory protection. (Note ESMA specifically reference “retail traders” in their ban – not professional traders.)

To register as professional, traders must prove a certain level of trading experience (2 years in a financial service role for example). They must also prove a certain level of trading capital (500k) – though this can be spread between multiple accounts.

In addition to opening up binary options again, registering as a professional will also mean traders can trade CFDs and Forex with much higher levels of leverage. The trade off is that professional traders lose regulatory protection.

Conclusion

So there we have it. The binary options ban does not have to mean the end of you trading binaries. If the ban stops uninformed traders getting their fingers burnt – but experienced traders can carry on using them, then the industry, while smaller, will be better off long term.

The ESMA Ban – And How To Continue Trading

ESMA Extends Ban On Binary Options

The ESMA ban on binary options has been extended again, and in all likelihood, the ban is likely to remain in place indefinitely. So with a blanket ban on the marketing and sale of binary options in Europe, is there anything traders can do to continue trading? Possibly…

How The Binary Options Ban Is Affecting Traders

Starting July 2020, the European Securities and Markets Authority (ESMA) has prohibited the marketing, distribution or sale of binary options to retail investors. The ban was and still is temporary, for a 3 month period, with the possibility of renewal when said period is up.

Since then, ESMA has constantly renewed the ban, and have announced they will do so again when the current period is up, on the 2nd of January 2020. The Authority will probably continue to renew this measure indefinitely, so EU customers are not likely to trade Binary Options anytime soon, at least not with regulated brokerages.

Currently we are dealing with a black and white situation, without much room for interpretation: binary options cannot be marketed, sold or distributed to retail clients. Actually there’s a “but” somewhere in there because ESMA has decided to exclude from the ban some forms of Binary Options.

However, as you will find out next, these exceptions are almost impossible for the brokers to implement while still making enough money to avoid bankruptcy.

Exception 1: “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

That’s a White Unicorn if I ever saw one. It basically means that on any given trade the worst outcome is you get your money back, including all commissions and fees. The other outcome is to win the entire payout. Looking forward for any brokerage implementing such a binary option but I won’t be holding my breath!

Exception 2: A binary option that meets the next three conditions cumulatively:

  • expiration time of at least 90 calendar days
  • a prospectus drawn up and approved in accordance with the Prospectus Directive (2003/71/EC) is available to the public
  • 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”.

While the first 2 conditions are pretty straightforward, the last one may need a bit of clearing up: the brokerage should have no interest in the outcome of the trade. In other words, the old conflict of interests where the brokerage would make money when you lose a trade should completely go away.

Remember that all three conditions are cumulative, so it will be extremely difficult for a brokerage to implement them all at once and to make this type of binary option both lucrative for them and appealing to traders.

Avoiding The Ban

In short, yes. There are some viable ways to continue trading. One choice we are not going to expand on is using unregulated brokers – this is high risk and fraught with danger, to the point where it should not even be considered. One downside to the ban, is that it does nothing to address the scams. They operated outside of the law anyway, this ban will not change their behaviour (It may even embolden them as they know the European regulator has no appetite to chase them). Only use regulated brokers. So with that said, let us move on to some genuine ways you can carry on trading;

Going Professional

This choice will only be open to certain traders. You need to prove a certain amount of trading experience, and trading capital. Assuming you can, then you can register as a professional trader. This makes you exempt from the ESMA rule changes (You are no longer a ‘retail’ investor). Brokers can lawfully offer you binary options again. The downside is that you sign away any regulatory protection. You are basically saying you are financially aware enough to use high risk products. It is a great choice for experienced traders and indeed, many have already taken this step to continue trading just as they were.

Alternative Products

Many brokers have created similar products to binaries, but made them different enough to dodge the ban. These include FX Options and Knock Outs. Expect more to follow. While not strictly binaries anymore, many of the same strategies will work. One note of caution however, is that ESMA are watching these products closely. If they feel the ban is being flouted, they may insist the new products are removed too.

Enquire With Your Broker

This option needs some detective work. Many brokers have multiple regulated ‘arms’ all under the one brand. For example, they may have a European based company, regulated in Europe, and another company registered in Australia or Malaysia to service each market. As a retail trader, you are able to request an account with one of the other ‘offshore’ or non-european companies, but with the same brand.

ESMA will allow European traders to trade under a different arm of the same brand – as long as the request came from the trader – the brand themselves are not allowed to market this as an option for their customers. ESMA have already reprimanded a couple of brands for trying. But as long as the request comes from you, the trader, then it is ok for the broker to facilitate that change for you. Once operating under another regulated arm of the business, you can access binaries again.

So get the deerstalker on and see if your broker has regulated branches in different jurisdictions.

Conclusion

So with these choices, it is possible to carry on trading, possibly without even leaving your current broker. There is also absolutely no need to look at unregulated firms. So the ban on binary options does not have to mean the end of your binary trading.

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