Last December the ESMA, the European Securities and Markets Authority, shocked traders with news they were planning a blanket ban of all retail binary options trading. If they follow through with this and other proposed rules it could change the face of binary, forex and CFD trading forever.
Along with a ban of binary options the regulator is planning to cut leverage on forex and CFD products to only 20X for non-major pairs and 30X for major pairs. The consultation period ended early February resulting in a large number of negative responses from industry and traders. The consensus is the allow at least 50X leverage for experienced traders but there is no word yet on a final version of the new regulations.
Regulators throughout Europe are cracking down on binary and its not because binary options are bad. It’s because there is so much fraud based on binary options, so may scams that lead to binary options brokers and so many people who have been hurt by underhanded marketing gurus. One such trick is to use a UK based virtual office as an address, leading the public to believe the broker was regulated. The FCA has been cracking down on that and recently added new names to its black list. The FCA took over regulation of binary options at the beginning of the year when the MiFIDII came into effect.
Specifically, the FCA is warning about Plusoption, a brand known to operate under several different names. Redfield Markets, Tradeplus Solutions and ACV Operations SRL are only a few of the names known. The FCA warns the company is not regulated in any jurisdiction or registered with them.
Italy’s CONSOB still allows binary options trading, as does the UK FCA, but only with proper regulation and registration. The regulator has also added a number of new names to its list of unregulated brokers in its efforts to keep public awareness up to date. On the list are forex, CFD and binary options brokers as well as financial advisers and other services thought to be frauds.
Begian authorities at the FSMA are faced with a second wave of fraud related to binary options. This regulator has already banned binary options but its citizens are now being approached by firms claiming to recover lost money. For a small fee those who have been scammed are guaranteed a certain percentage will be returned. The FSMA warns that these boiler rooms are scams and that no one should give any money to people claiming to recover lost funds. Legitimate recovery firms will never ask for money up front.
Will the ESAM ban binary options? We aren’t sure but it looks likely. The takeaway for traders is that CFD’s will still be allowed which means lots of trading opportunities in the future. A probably a lot less scams although we’ll still have to deal with those too.