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#1 08-01-2019 21:35:01

johnedward
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ESMA officially extends binary option restrictions

ESMA officially extends binary option restrictions


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Article by FinanceFeeds:

The European Securities and Markets Authority recently published a notice on its website indicating that it has formally adopted a decision to renew the prohibition of marketing, distributing and selling binary options to retail investors.

This news will come as no surprise to many of you, as the regulator previously announced it was going to renew the prohibitions on binary options from 1 January 2019, for three months back in November, as we reported.

In November, the regulator gave its reason: “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.

Today, however, the notice merely confirms the conditions of the prohibition, stating that a binary option is a derivative that meets the following conditions:

(a) it must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event;

(b) it only provides for payment at its close-out or expiration;

(c) its payment is limited to:

(i) a predetermined fixed amount or zero if the underlying of the derivative meets one or more predetermined conditions; and

(ii) a predetermined fixed amount or zero if the underlying of the derivative does not meet one or more predetermined conditions.

ESMA continues its restrictions against CFDs

The announcement comes just days after the European regulator announced that it will also extend its temporary restrictions on the sale of contracts for differences (CFDs) to retail customers for a further three-month period, saying it was still concerned about investor protection, as we reported earlier.

Theoretically, ESMA can continue to renew its prohibitions on both binary options and CFDs forever. In the next couple of years the regulator may put a permanent policy in place, but until then, it is highly likely that they will simply continue to renew the restrictions indefinitely.


"Anything worth having is worth going for - all the way." - J.R. Ewing

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