The Australian Securities and Investments Commission (ASIC) is seeking feedback on a proposal to extend its ban on binary options products until 1 October 2031, the regulator announced on Thursday.

Initially, the Aussie financial market supervisor banned the sale of binary options to retail clients on 3 May 2021, but that intervention order will expire on 7 October 2022, unless extended.

Binary options allow traders to speculate on the occurrence or non-occurrence of an event, hence binary, within a specific time period. These are over-the-counter derivatives instruments and are considered very risky globally and are banned or heavily restricted in most jurisdictions.

Risky Trading Instrument

The Aussie regulator’s decision to put a ban on binary options came after it found out that such instruments caused significant detriment to retail clients and would continue to do so if not curbed.

Additionally, ASIC highlighted that in the 13 months before the ban was imposed, between 74 percent and 77 percent of the retail clients lost money while trading the speculative binary options. Further, the net losses from trading these instruments mounted to AU$15.7 million compared with AU$1.7 million in total net profits.

“As expected, retail clients have not made any losses (or profits) from trading binary options with licensed issuers since the product intervention order took effect,” ASIC stated.

However, the regulator pointed out that 68 percent of the wholesale Aussie clients still made losses from trading binary options in the period as the imposed ban does not apply to them.

A ban on binary options was not the only trading product intervention measure taken by ASIC last year. The regulator also imposed a strict limit on trading leverages offered to retail clients by regulated brokers. Though initially that was only imposed for 18 months, ASIC extended it for another 5 years, until 23 May 2027.

The Australian Securities and Investments Commission (ASIC) is seeking feedback on a proposal to extend its ban on binary options products until 1 October 2031, the regulator announced on Thursday.

Initially, the Aussie financial market supervisor banned the sale of binary options to retail clients on 3 May 2021, but that intervention order will expire on 7 October 2022, unless extended.

Binary options allow traders to speculate on the occurrence or non-occurrence of an event, hence binary, within a specific time period. These are over-the-counter derivatives instruments and are considered very risky globally and are banned or heavily restricted in most jurisdictions.

Risky Trading Instrument

The Aussie regulator’s decision to put a ban on binary options came after it found out that such instruments caused significant detriment to retail clients and would continue to do so if not curbed.

Additionally, ASIC highlighted that in the 13 months before the ban was imposed, between 74 percent and 77 percent of the retail clients lost money while trading the speculative binary options. Further, the net losses from trading these instruments mounted to AU$15.7 million compared with AU$1.7 million in total net profits.

“As expected, retail clients have not made any losses (or profits) from trading binary options with licensed issuers since the product intervention order took effect,” ASIC stated.

However, the regulator pointed out that 68 percent of the wholesale Aussie clients still made losses from trading binary options in the period as the imposed ban does not apply to them.

A ban on binary options was not the only trading product intervention measure taken by ASIC last year. The regulator also imposed a strict limit on trading leverages offered to retail clients by regulated brokers. Though initially that was only imposed for 18 months, ASIC extended it for another 5 years, until 23 May 2027.