Denmark’s financial watchdog said it would permanently ban the sale of binary options to retail customers and non-professional investors from July 2019 to protect them from large trading losses.
The move of Danish Financial Supervisory Authority (FSA) does not come as a surprise as the regulator has already imposed restrictions on the trading of binary options products in 2018 based on the European mega regulator’s rules.
The European Securities and Markets Authority (ESMA) also has in place curbs on contracts for difference (CFDs) across the European Union. Overall, it constituted ESMA’s first use of its new intervention powers under MiFID II rules, which came into effect in January 2018.
The decision also mirrors the UK financial watchdog’s move which has already rolled out a permanent ban on retail selling of binary options back in April, while similar measures are under way in other countries.
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The ban covers loopholes in ESMA’s temporary prohibitions
These restrictions were supposed to be temporary, but an increasing number of European decided that the best way forward was rolling out a permanent ban, as binary options were seen merely gambling products dressed up as financial instruments.
In its statement, the FSA expressed concern about how these high-risk speculative products are offered to retail investors, potentially leading to significant losses.
The FSA said the prohibition would apply to brokers operation in and from Denmark, and thus goes further by including both local dealers and those operating under the European passport regime.
“The FSA shares ESMA’s and other competent national authorities’ concerns about the growing number of retail customers across the EU who buy binary options and consistently lose their money. The Danish FSA also considers that the risk for retail customers will be present in both Denmark and the rest of the EU, unless the competent national authorities exercise their power to impose a permanent ban to replace ESMA’s temporary ban,” said the Danish watchdog.