Denmark set to impose permanent ban on offering of binary options to retail investors

Maria Nikolova

The new rules, which correspond to ESMA product intervention measures at a national level, are set to come into effect in early July.

Denmark’s Financial Supervisory Authority (FSA) has earlier today unveiled its proposals to introduce a permanent ban on the marketing, distribution and sale of binary options to retail customers.

The Danish rules will be equivalent to the product intervention measures that ESMA introduced last summer. The ban on the offering of binary options in Denmark, however, will be permanent.

The Danish FSA has repeatedly warned retail customers against investment in binary options. The regulator notes that binary options are inherently risky and complex products and are often traded speculatively over the Internet with providers that do not comply with investor protection rules.

The FSA shares ESMA’s and other competent national authorities’ concerns about the growing number of retail customers across the EU who buy binary options and consistently lose their money. The Danish FSA also considers that the risk for retail customers will be present in both Denmark and the rest of the EU, unless the competent national authorities exercise their power to impose a permanent ban to replace ESMA’s temporary ban.

The Danish ban will apply to binary options for retail customers in and from Denmark and will thus apply to both Danish securities dealers and securities dealers operating in Denmark via the freedom of establishment or under the rules on the free provision of services. The ban is expected to take effect in early July 2019.

A number of EU nations have also acted to ban the offering of binary options to retail traders – for instance, Germany, Austria, France, the UK, and Cyprus. ESMA has been supportive of the national measures. The pan-EU regulator has issued favourable opinions on all proposals for national product intervention measures concerning binary options thus far.

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