The ESMA Ban – And How To Continue Trading

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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.

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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.

ESMA Restrictions Continue To Stifle Online Trading Co.

Law360, London (December 5, 2020, 7:42 PM GMT) — Online trading platform IG Group said that it expects its revenue to decline as European Securities and Markets Authority restrictions on selling speculative trading products continue to sting the sector, leading to a fall in new customers.

IG Group Holdings PLC said on Tuesday that it expects its EU revenue in the four months since August to drop to 20 percent lower than during the same period in 2020. And sales in its six month results to the end of November are expected to be six percent lower compared to last year, the platform said.

The group — which is the world’s.

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The ESMA Ban – And what it means for Trading

How The Binary Options Ban Is Affecting Traders

In July 2020, the European Securities and Markets Authority (ESMA) has officially forbidden the promotion, distribution or sale of binary options. The ban is temporary, for a three month period, with the option of extension when the period runs out.

Since then ESMA has continually extended the ban, and they have just announced they will do so again. The current period is up on January 2nd, 2020. It looks like the authorities will keep renewing the ban indefinitely. EU traders are therefore not going to be trading Binary Options with the regulated brokerages in the near future.

ESMA Extends Ban On Binary Options

So, all in all, the ESMA restriction on binary options has been extended once more, and it looks like the ban is going to stay. So with an overall restriction on the advertising and sale of binary options in Europe, is there anything traders can do to keep trading?

Some of the Binary Options are still allowed

Currently, it looks like there is a situation that doesn’t leave much room fort he interpretation. As stated above, the binary options can’t be advertised, sold or distributed. However, there are a couple of exceptions. ESMA has decided to allow some forms of Binary Options.

Be that as it may, as you will discover straightaway, these exemptions are not practical and they seem hard to implement while making enough money.

Exemption 1:A binary option where the lower of the two pre agreed amounts is at equal or greater than the total payment made by a retail client (trader) for the binary option, including any fees and other costs

That is undeniably a White Unicorn. It fundamentally means that on some random exchange the most noticeably terrible result is you recover your cash, including all commissions and charges. The other result is to win the whole payout. There are no platforms that would offer that kind of deal.

Exemption 2: A Binary Options that meet the following three conditions at once:

  • the expiration time of minimum 90 days
  • an outline drawn up and endorsed as per the Prospectus Directive (2003/71/EC) and available to the public
  • “the binary option doesn’t open the provider to showcase hazard all through the term of the binary option and the provider or any of its gathering elements doesn’t make a benefit or misfortune from the paired choice, other than recently revealed commissions, exchange expenses or other related charges”.

While the initial 2 conditions are truly direct, the last one may require a touch of clearing up: the trader ought to have no enthusiasm for the result of the exchange. As such, the old circumstance where the brokerage would profit when you lose a trade would completely disappear.

Keep in mind that each of the three conditions has to be present at the same time, so it will be incredibly hard for a brokerage to have them all.

Can you continue trading?

To put it plainly, yes. There are some practical approaches to maintain trading. One decision we won’t advise is going to unregulated agents – this is very risky and loaded with frauds, to the point where it shouldn’t be considered. One drawback to the ban is that it does nothing to address the scams: they are outside of the law in any case, and the ban won’t change that (It might even encourage scammers as they probably are aware the European controller has no hunger to pursue them). Just utilize directed agents. So all things considered, let us proceed onward to some certified ways you can continue exchanging;

Going Professional

This decision might be available to specific traders. You have to demonstrate a decent amount of trading experience, and capital. If you can do that, you can enlist as an expert broker. This makes you absolved from the ESMA rule transforms (As you are never again a ‘retail’ speculator). Representatives can legally offer you binary options once more. The drawback is that you are no longer regulatorily protected. It’s because you are fundamentally saying you are experienced enough to use high-risk financial products. It is a very good decision for experienced traders and undoubtedly, many have just made this move to keep trading in the same way as they were before the ban. Some of the most trusted binary options brokers are: IQ Option, AVAtrade, eToro, Olymp trade.

Ask Your Broker

This choice needs some investigative work. Numerous merchants have different ‘arms’ all under a single brand. For instance, they may have a European based organization, controlled in Europe, and another organization enrolled in Australia or Malaysia to support each market. As a retail trader, you can demand a record with one of the other foreign or non-European organizations, however with a similar brand.

ESMA will enable European brokers to exchange under an alternate arm of a similar brand – as long as the request originated from the trader. The Brand is not allowed to use this as a possibility for their clients. ESMA has just denounced two or three brands for trying to do just that. Be that as it may, as long as the request originates from you, the trader, at that point, it is alright for the representative to encourage that change for you. When working under another managed arm of the business, you can get to binaries once more.

So checking whether your broker has regulated branches in different jurisdictions could be a solution for you.

Other Trading Options

Numerous brokers have created similar products to binary options, yet made them distinctive enough to avoid the ban. These incorporate FX Options and Knock-Outs. Anticipate that more should follow. A large number of strategies you used for binaries still work. However, ESMA is viewing these items intently. In the event that they feel the ban is being ridiculed, they may demand the new products are banned as well.

Another option which is also highly popular is the binary options robot trading system where a robot is trading on your behalf and your instructions. One of the best robots on the market is the option robot.

So with these options, it is possible to continue trading, potentially without leaving your present broker. There is no reason to take a think about unregulated brokers. There you have it, the ban on binary options doesn’t mean you have to stop with binary trading.

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    2nd place! Good choice!

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