EUROPE: ESMA to Reinstate Prohibition of Binary Options

Friday August 24 2018

The European Securities and Markets Authority (ESMA) have recently decided to restore the prohibition of marketing, distribution or sale of binary options for retail clients. This will now come in to effect from 2 October 2018 for a further three month period.

ESMA has carefully considered the need to extend the intervention measure currently in effect. ESMA considers that a significant investor protection concern related to the offer of binary options to retail clients continues to exist. It has therefore agreed to renew the prohibition from 2 October.

ESMA agreed to exclude from the scope of the renewal the following binary options:

• 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; and
• a binary option that meets cumulatively the following three (3) conditions:
  • (a) the term from issuance to maturity is at least ninety (90) calendar days;
  • (b) a prospectus drawn up and approved in accordance with the Prospectus Directive (2003/71/EC) is available to the public; and
  • (c) 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.

ESMA will continue to keep these products under review during the prohibition period. The renewal was agreed by ESMA’s Board of Supervisors on 22 August 2018.

For more information please click on the above link.