Dutch regulator proposes ban on advertising of binary options

Maria Nikolova

Following the example of its French counterpart, the Dutch regulator also proposes ban on advertising of high-risk products, including binary options.

The Financial Markets Authority (AFM) of the Netherlands has today unveiled its proposals to ban advertising of high-risk financial products, with the ban to cover binary options amid other classes of “toxic” financial instruments.

The regulator has opened a consultation, which has been drafted in co-ordination with other European regulators. In fact, the French financial markets regulator AMF has made a decisive move in this respect last year, proposing a ban on all sorts of advertising of high-risk financial products like binary options. The ban was included in the Sapin 2 law. Among other effects it had, it led to many football clubs abandoning their partnerships with binary options brands.

The Dutch regulator explains that the toxic products to be covered by the ban often lead to a harmful situation for consumers, as they can quickly lose money. The watchdog also notes that these products are often offered to Dutch investors by companies operating abroad, usually working on the basis of a European passport.

The list of high-risk products includes (amid others): binary options, CFDs with leverage higher than 10x, futures with leverage higher than 10x and payday loans.

The consultation is open until April 3, 2017.

Meanwhile, Cyprus – a key destination for binary options companies, is about to introduce vast changes for binary options brokers, which it requires to obtain Cyprus Investment Firms licenses. Last week, the Cyprus Securities and Exchange Commission (CySEC) published a Circular with a raft of proposed changes to regulations, so that CIFs will “meet their obligations in acting in the best interest of their clients”.

The changes affect trading methodology, reporting, as well as the nature of binary options that can be offered. For instance, historical records of the Expiration Values for each Underlying Market should be accessible to clients in a specific section of the trading platform or a relevant link referral to the website of the CIF. Certain types of binary options types will no longer be acceptable. The Tenor must be for a period of at least 5 minutes. The Strike Prices must be fixed for all Digital Contracts within a Contract Series, and displayed electronically to clients, at least 10 seconds prior to those Digital Contracts entering their Tradeable Period.

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