Belgium Bans OTC Forex, CFDs and Binary Options, Including from EU Brokers

After the Belgian market watchdog grew tired of routinely issuing warnings against unauthorized firms soliciting clients in its jurisdiction, it got the local government to completely ban retail online trading in Forex , binary options and CFDs. The Financial Services and Markets Authority (FSMA) has announced a Royal Decree prohibiting the distribution of the instruments starting from 18 August 2016.

The Belgian watchdog says these products are "marketed aggressively and are extremely risky, often involving transactions over a very short period and without any connection to the real economy." By completely banning them, the FSMA will stop traders from working with FX, CFDs and binary options brokers that are operating legally in the EU, but it is unlikely to deter unregulated firms unless more drastic measures than a decree are used.

Join the industry leaders at the Finance Magnates London Summit, 14-15 November, 2016. Register here!

The ban only applies to over-the-counter (OTC) derivatives and not to trading on a regulated exchange or on a multilateral trading facility. It is meant to supplement a Belgian distribution ban that was already in force for certain products, such as financial products with Bitcoin or other Cryptocurrencies as their underlying.

The second element of the ban regards aggressive sales tactics, or as the FSMA calls it "inappropriate distribution techniques (cold calling via external call centres, inappropriate forms of remuneration, fictitious gifts or bonuses, etc.) used when distributing OTC derivatives to consumers."

Government decelerations

The Minister for Employment, the Economy and Consumer Affairs, Kris Peeters, noted: "This Regulation contributes to better protection of consumers of financial products. Henceforth, it will be clear to everyone that binary options and other speculative derivatives have no place on the Belgian retail market.

The Minister of Finance, Johan Van Overtveldt, remarked: "In recent years, we have seen a rise in the number of foreign offerors of products such as binary options that approach the Belgian market without having an authorization and /or a published prospectus. This Regulation will help combat such offers."

Jean-Paul Servais, chairman of the FSMA, stated: "The FSMA has repeatedly issued warnings about the risks associated with these products. Other supervisory authorities and ESMA have done likewise. Yet the FSMA continues to receive complaints about these products. Therefore it proposed establishing a framework regulating the distribution of OTC derivatives and to prohibit the distribution of certain types of these products."

Beyond just the continued complaints and warnings it is likely that the Belgian watchdog was spurred on by the recent decision by fellow francophone nation France to ban forex and binary options advertising, as was predicted by Finance Magnates on Monday.