Financial Conduct Authority confirms ban on sale of binary options to retail consumers
City watchdog the Financial Conduct Authority (FCA) said today it was banning the sale, marketing or distribution of binary options to retail customers.
Binary options are financial instruments that allow traders to speculate on which way a market will move.
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The FCA said the new rules are a response to widespread concern about the “inherent risk of these products and the poor conduct of the firms selling them.”
The FCA said binary options have led to consumer harm through large and unexpected trading losses.
The rules are similar to the European Securities and Markets Authority’s (ESMA) existing EU-wide temporary restriction on binary options, however the FCA is also banning so-called securitised binary options that were excluded from ESMA’s ban.
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The new rules come into force on 2 April.
The FCA estimates that the ben on binary options could save retail consumers up to £17m per year and may reduce the risk of fraud by unauthorised entities offering these products.
Christopher Woolard, executive director of strategy & competition at the FCA, said: “Binary options are gambling products dressed up as financial instruments. By confirming our ban today we are ensuring that investors don’t lose money from an inherently flawed product.”