For the second time since first introducing a three-month ban on offering binary options trading to retail clients in the EU in July 2018, European financial regulator ESMA has extended the ban for a further three months.
The current ban is set to lapse on January 1, 2019. The three month extension takes the ban through to April 1, 2019.
The other side of ESMA’s new trading regulations – mainly a temporary cap on leverage on Forex and CFD products – was initially enacted a month after the binary options ban (i.e. on August 1, 2018), and was already extended for one additional three month period, through to February 1, 2019. Interestingly, ESMA recently admitted that clients did worse after the leverage cap was enacted than before, and that their legislation opened the door to offshore brokers looking to lure European traders with much less restrictive trading terms.
The note issued this morning by ESMA on the matter reads as follows:
ESMA RENEWS BINARY OPTIONS PROHIBITION FOR A FURTHER THREE MONTHS FROM 2 JANUARY 2019
09 November 2018
MIFID – INVESTOR PROTECTION
PRESS RELEASES
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, 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 January 2019 on the same terms as the previous renewal decision that started to apply on 2 October 2018.
The renewal was agreed by ESMA’s Board of Supervisors on 7 November 2018.
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 January 2019 for a period of three months.