The European Securities and Markets Authority (ESMA) announced on Monday that it has agreed to extend the restrictions for binary options which prohibits the marketing, distribution or sale of binary options to retail investors.
The decision, which does not come as a surprise to the markets, was adopted on September 21, 2018, and will be effective from this Tuesday, October 2, 2018, for a period of three months until the end of this year.
The pan-European regulator initially announced that it would renew its restrictions on binary options back in August this year. At the same time, the regulator also announced some changes to the renewal.
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In August, ESMA identified that some binary options do not pose a significant threat to retail investors and are therefore no longer included in the scope of the measures. Specifically, the watchdog decided that binary options that are long-term investments (at least 90 days), that are accompanied by a prospectus and that are completely hedged by the provider or another entity in the same group, are less likely to cause significant harm to investors.
In addition, in August the regulator has also stated that binary options which have one of two predetermined payouts at the end of the term, neither of which is less than the initial investment of the trader, will be excluded.
ESMA Renews CFD Restrictions for Retail Traders
The renewal of the binary options restrictions follows on the back of the heels of the regulator announcing on Friday that it will extend its restrictions on the sale, distribution, and marketing of contracts for differences (CFDs), as Finance Magnates reported.
The renewal will come into effect from November 1, 2018, and will last for three months until January next year. According to the rationale from ESMA, the watchdog extended the measures because “significant investor protection concern related to the offer of CFDs to retail clients continues to exist”.