This is not an April fools joke: the FCA has announced that it will permanently ban UK regulated companies to sell binary options as of April 2, 2019. Going further than the “permanent temporary ban” of the European Union, the British regulator with totally ban from selling, marketing or distributing binary options trading product. Wmich does not mean UK retail traders won’t be able to trade them…
The introduction of the new regulatory framework Mifid 2 empowers the FCA, Brexit or not, to take such decision. CFDs should get the same treatment pretty soon, the Financial Times says the contracts for difference ban could be introduced as early as next month.
Binary options trading ban: justifications
The FCA invokes the usual critics against binary options to justify its decision to ban them:
- Brutally aggressive marketing
- Easily manipulated
- Financial trading product “inherently flawed”
As of April 2 no FCA regulated broker will be allowed to offer binary options trading to its customer in the UK. Does it mean Brittons won’t be able to trade digital options or CFDs in the future? No. Actually, their only options will be mainly to use the services of the very same criminal companies that have wrecked the binary options industry and are responsible of the scams. So, to sum it up, in order to protect consumers against rogue brokers that are out of their reach, they eliminate the actors that they can oversee. Okay…
Meanwhile, you can trade FX with a leverage of 50 to 500. Bottom line: any beginner trader who takes inconsiderate risks will lose money. Any person willing to gamble can go and play luck games and lose tons of money. Not only it does not solve the issue, it won’t change anything, or even make it worse. Throughout history prohibition has never worked.
Full text of the press release
FCA confirms permanent ban on the sale of binary options to retail consumers
Following consultation feedback, the Financial Conduct Authority (FCA) is today confirming all firms acting in or from the UK are prohibited from selling, marketing or distributing binary options to retail consumers.
The new rules tackle widespread concerns about the inherent risks of these products, and the poor conduct of the firms selling them. This has led to consumer harm in the UK and internationally through large and unexpected trading losses.
The FCA’s rules are in substance the same as the European Securities and Markets Authority’s (ESMA) existing, EU-wide temporary restrictions on binary options. However, the FCA is also applying its rules to so-called ‘securitised binary options’ that were excluded from ESMA’s prohibition. Securitised binary options are not currently sold in or from the UK. The FCA thinks these products pose the same risks for investors and so are extending the scope of the prohibition to prevent a market developing for these products.
The FCA’s rules are permanent and come into force on 2 April 2019.
The FCA estimates the permanent ban on binary options could save retail consumers up to £17m per year, and may reduce the risk of fraud by unauthorised entities claiming to offer these products.
Christopher Woolard, Executive Director of Strategy & Competition at the FCA, said:
‘Binary options are gambling products dressed up as financial instruments. 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.
For more information on these types of scams or to inform the FCA of a potential investment scam, please refer to the FCA’s ScamSmart pages.