The European Securities and Markets Authority has extended its ban on so-called “binary options” products for another three months.
Esma and the FCA have issued a number of warnings over the products, also known as contracts for difference, over their use of leverage, commissions and complexity, arguing that they can present a risk to retail clients.
In a statement this morning, Esma says it will roll out its new rules that restrict the products’ marketing, distribution or sale for another three months from October. The current regime has been in place since early July
The regulator writes: “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.”
However, as it reviewed the ban, it has found that sound structures of binary options contain sufficient investor protection to exclude them from the tightened rules.
To be excluded, a binary option must have a maturity period of at least 90 days, have a publicly available prospectus, and be fully hedged by the provider or another company linked to the provider.