Consultation on binary options ban closes in Quebec and Alberta

Today, May 29, 2017, marks the closing date of the consultation on a proposed binary options ban in two Canadian provinces – Quebec and Alberta. The prohibition on all forms of advertising, promoting, offering and selling of binary options was proposed by the Canadian Securities Administrators (CSA), an organization whose members include the securities regulators from 10 Canadian provinces and 3 territories, on April 26, 2017.

The proposal seeks to protect investors from becoming victims of binary options fraud and the illegal promotion of what the CSA dubs an extremely high-risk product. In outlining the proposal, the CSA noted that all sorts of binary options pose significant risks to individuals.

Alberta, which is among the first two provinces to see the consultation close, has registered a tragic case related to binary options, as 61-year old Fred Turbide of Edmonton committed a suicide In December 2016, after having lost a heavy sum of money due to using the services of binary options platform 23traders.com.

Quebec, in its turn, has been very active in pushing for a ban on binary options offering. In fact, the CSA consultation marks the second time that the province seeks opinions on such a ban. In February this year, Quebec’s financial regulator AMF opened a consultation on a binary options ban. The consultation closed in early March, triggering opposition from the industry.

The Investment Industry Association of Canada (IIAC), representing 132 members, which are brokerage firms regulated by the Investment Industry Regulatory Organization of Canada (IIROC), has stated that binary options are not the problem, per se, whereas fraudulent and unregulated businesses offering binary options are. IIAC proposed that instead of banning binary options, Quebec should allow brokerage firms regulated by the Investment Industry Regulatory Organization of Canada (IIROC) to be registered to offer binary options to investors.

There were calls from the Montréal Exchange (MX) and Canadian Derivatives Clearing Corporation (CDCC) to reduce the scope of the proposed prohibition so that offering of binary options via an exchange authorized in Quebec shall not be prohibited.

Although the responses (if there are any) to the new proposal to ban binary options are yet to be made public, it is likely that they will resemble those already filed in reply to the first proposal to ban binary options. We are curious to see whether the regulators will succumb to pressure from the industry and will refrain from imposing a ban, or whether they will stick to their original stance.