The European Securities and Markets Authority (ESMA) is extending its ban on the marketing, distribution and sale of binary options to retail clients for another three months, the authority announced Friday.
ESMA adopted a ban on July 2. It was initially set to expire on Oct. 2.
In extending the ban, ESMA believes that a “significant investor protection concern” continues to exist for retail investors, the authority says in a news release.
However, the authority also agreed to exclude certain products from the ban.
An ESMA review has found that certain products have specific features that mitigate the risk of investor detriment. For example, certain products involve longer-term bets (at least 90 days), are issued under a prospectus, and are fully hedged by the product’s provider.
As a result, ESMA has concluded that a binary option that has all of these characteristics “is less likely to lead to a significant investor protection concern.”
In addition to excluding these sorts of products from the ban, ESMA is also explicitly excluding products that don’t put investors’ capital at risk.
The authority says that it will continue to review binary options during the prohibition period.
The Canadian Securities Administrators banned the sale of binary options to retail investors last year; but the Ombudsman for Banking Services and Investments (OBSI) recently announced that it is still receiving complaints from investors that are losing money to these schemes.