A series of policy measures designed to address the risks posed by retail investors trading in over-the-counter (OTC) leveraged products generally, and binary options specifically, were announced Wednesday by the International Organization of Securities Commissions (IOSCO).
IOSCO’s Report on Retail OTC Leveraged Products sets out steps for regulators to take to deal with the risks that arise when OTC leveraged products are sold to retail investors.
The report includes three toolkits for regulators that set out measures for increasing retail investor protection in the OTC market for leveraged products, such as rolling-spot forex contracts, contracts for differences and binary options, which are often traded on a cross-border basis.
The toolkits provide guidance for dealing with the risks posed by dealers selling these products, advice for educating investors about the risks of OTC leveraged products, and insight on approaches to enforcement, particularly against unlicensed firms offering these kinds of products.
“The policy, enforcement and educational measures included in the report are complementary and should be seen as part of a holistic approach to addressing the risks of the relevant products,” it says .
Also Wednesday, IOSCO issued a public statement intended to warn investors and regulated firms about “the risks of investing in illegal or fraudulent binary options.” The statement also recommend regulatory responses for mitigating the risks and harm to retail investors.