The FCA has confirmed that binary options products can no longer be sold, marketed or distributed to retail customers.
In a statement today, the FCA says that binary options – which often involve the investor either taking a fixed return if a strike price is reached or losing their original investment entirely – are “gambling products dressed up as financial instruments”.
The FCA has found that consumers have suffered large and unexpected trading losses. It has also uncovered poor conduct amongst the firms selling the “inherently risky” options, so is going above and beyond EU rules to apply a ban to so-called “securitised binary options” as well because they “pose the same risks for investors”.
The European Securities and Markets Authority had recently placed EU-wide temporary restrictions on binary options, and it is the FCA’s intention to prevent a market for securitised binary options developing.
The rules, which come into force on 2 April, could save consumers £17m a year, according to FCA estimates, and could also reduce the likelihood of fraud from unauthorised firms operating in the market.
FCA director of strategy and competition Christopher Woolard says: “By confirming our ban today we are ensuring that investors don’t lose money from an inherently flawed product.
“UK consumers should continue to be alert for binary options investment scams and should only deal with financial services firms that are authorised by the FCA. As the sale of binary options to retail consumers is now prohibited, any firm offering binary options services to retail consumers is likely to be a scam.”