They were convinced that this measure would protect consumers and resolve the deluge of complaints they had received over the previous decade. The ban was originally implemented temporarily, for three months. It also coincided with restrictions on CFD and Forex trading in Europe.

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

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.

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? 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.

This is not a safe route. Here are some methods to continue trading in a safe, legal way. 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. 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. 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. 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;. 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. 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. 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. This option needs some detective work. For example, they may have a European based company, regulated in Europe, and another company registered in Australia or Malaysia to service each market.

The European Securities and Markets Authority ESMA has agreed on measures on the provision of contracts for differences CFDs and binary options to retail investors in the European Union EU. Binary Options - a prohibition on the marketing, distribution or sale of binary options to retail investors; and. Contracts for Differences - a restriction on the marketing, distribution or sale of CFDs to retail investors. This restriction consists of: leverage limits on opening positions; a margin close out rule on a per account basis; a negative balance protection on a per account basis; preventing the use of incentives by a CFD provider; and a firm specific risk warning delivered in a standardised way.

In accordance with MiFIR, ESMA can only introduce temporary intervention measures on a three monthly basis. Before the end of the three months, ESMA will consider the need to extend the intervention measures for a further three months. ESMA, along with National Competent Authorities NCAs , concluded that there exists a significant investor protection concern in relation to CFDs and binary options offered to retail investors.

This is due to their complexity and lack of transparency; the particular features of CFDs — excessive leverage — and binary options - structural expected negative return and embedded conflict of interest between providers and their clients; the disparity between the expected return and the risk of loss; and issues related to their marketing and distribution.

The new measures on CFDs will for the first time ensure that investors cannot lose more money than they put in, restrict the use of leverage and incentives, and provide a risk warning for investors. However, the inherent complexity of the products and their excessive leverage — in the case of CFDs — has resulted in significant losses for retail investors. The product intervention measures ESMA has agreed under Article 40 of the Markets in Financial Instruments Regulation include:.

Leverage limits on the opening of a position by a retail client from to , which vary according to the volatility of the underlying:. A margin close out rule on a per account basis. Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses;. ESMA intends to adopt these measures in the official languages of the EU in the coming weeks, following which ESMA will publish an official notice on its website.

The measures will then be published in the Official Journal of the EU OJ and will start to apply one month, for binary options, and two months, for CFDs, after their publication in the OJ. Translated versions: BG CS DA DE EL ES ET FI FR HR HU IT LT LV MT NL PL PT RO SK SL SV.

Frequently Asked Questions. ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors 27 March The agreed measures include: 1. Binary Options - a prohibition on the marketing, distribution or sale of binary options to retail investors; and 2. Significant Investor Protection Concern ESMA, along with National Competent Authorities NCAs , concluded that there exists a significant investor protection concern in relation to CFDs and binary options offered to retail investors.

Leverage limits on the opening of a position by a retail client from to , which vary according to the volatility of the underlying: · for major currency pairs; · for non-major currency pairs, gold and major indices; · for commodities other than gold and non-major equity indices; · for individual equities and other reference values; · for cryptocurrencies; 2. This will provide an overall guaranteed limit on retail client losses; 4. A restriction on the incentives offered to trade CFDs; and 5.

Next steps ESMA intends to adopt these measures in the official languages of the EU in the coming weeks, following which ESMA will publish an official notice on its website. Translated versions: BG CS DA DE EL ES ET FI FR HR HU IT LT LV MT NL PL PT RO SK SL SV Frequently Asked Questions. pdf ON THE SAME TOPIC. ESMA appoints new Chairs of Standing Committees 16 December ESMA promotes clarity to market participants on best execution reporting 14 December ESMA provides guidance for supervision of cross-border activities of investment firms 14 December ESMA consults on rules for passporting for investment firms 17 November ESMA issues an opinion on Product Intervention Measure on Futures taken by Germany 26 October ACER and ESMA enhance cooperation to strengthen oversight of energy and energy derivative markets 18 October ESMA announces strategic priorities for the next five years 10 October ESMA reminds firms of the impact of inflation in the context of investment services to retail clients 27 September ESMA publishes final guidelines on MiFID II suitability requirements 23 September ESMA finds NCAs' scrutiny and approval of prospectuses satisfactory 21 July

In other words, the old conflict of interests where the brokerage would make money when you lose a trade should completely go away. And if they find any risk, they might ban these products as well. In short, yes. It is possible for you to request an account with the Non-EU or off-shore branch of the business. The product intervention measures ESMA has agreed under Article 40 of the Markets in Financial Instruments Regulation include:. They were convinced that this measure would protect consumers and resolve the deluge of complaints they had received over the previous decade. The other outcome is to win the entire payout.

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