The Dutch Administrative Appeals Court (CBB) has confirmed the operating license of binary options brokerage Optionclub. The company has been in a lengthy battle with local authorities and in particular with The Netherlands Authority for the Financial Markets (AFM).
The financial regulator in the country has rejected the company’s application for a financial services provider on multiple occasions, with the latest rationale being that the company’s product resembles a game of chance.
With the Dutch company engaging in a lengthy battle with local regulators and courts for the approval of its financial services provider license, the result is final approval from the CBB.
The ruling of the Dutch court is expected to have profound effects on the industry as a whole, especially at a time when the Cyprus Securities and Exchange Commission (CySEC) has become more stringent and is looking to rein in illicit practices in terms of sales and advertising.
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The lawyers of Optionclub expect that the CBB judgement shall have important cross-border ramifications as well with regard to the interpretation and implementation of MiFID.
Previously, the Dutch Gambling Authority has denied any licenses to companies that are providing financial instruments which might have characteristics of games of chance.
Commenting on the announcement, the lawyers of Optionclub, Bas Jongmans and Hester Bais, said: “The final confirmation of the license today marks an important step in the development of regulation of binary options as financial instruments within the Netherlands, since with this issuance, AFM has confirmed that binary options shall be regulated by AFM in the Netherlands and as a result, licence holders shall be allowed to enter the European market, using a “European Passport”.”
Too Little Too Late?
With Optionclub finally reinstating its license, the company could be facing a new hurdle, as the country’s Finance Minister Jeroen Dijsselbloem recently stated that the country could be looking to ban advertisement on “toxic investment products”. The Dutch AFM stated binary options and the risks associated with high leverage on contracts for difference (CFDs) do fall into this category.
While the advertisement ban is not EU-wide, the recent trends with France and speculation about similar discussions in Germany are worrying the industry. With time, the likelihood that high leverage and market making products will be limited from advertising is likely to increase.