European Union decides: binary options soon forbidden! In the last couple of years the popularity of binary options has risen. Some people even earn a full income with it. A binary option, sometimes also called a digital option, is a way to trade price fluctuations in the global market. There are two sorts of payoffs: either a fixed monetary amount or completely nothing. So with binary options it’s actually ‘nothing at all’.
The European Union has been discussing binary options for years. Should there be a ban on this way of speculation or not? Now the EU has finally made a decision: binary options will soon be forbidden in the European Union.
What are binary options?
Binary options are very risky. You speculate if a stock price will rise or not, while there’s usually little time to make this decision. Sometimes you just have a minute. It means that you could or lose a lot of money in, let’s say, 30 seconds. According to the British and American media, many investors lost their entire savings with binary options. The international news agency Reuters wrote that more and more companies on the stock market offered binary options, especially in Israel.
Be careful with investment tips from ‘brokers’
Some investors find the ‘brokers’ who are involved with binary options very annoying. These people say that they want to help you by giving investment tips. However, investors should be very careful with this. In reality these brokers actually want to persuade you to invest more in binary options. Because of this misleading behavior, many people have lost a great amount of money.
Binary options: a game of chance or not?
The Authority for Financial Markets already warned in 2013 for the high risks of binary options. However, this part of the stock exchange it was never addressed until now. One of the reasons for the delay is the fact that exchange regulatory bodies never really cared about it, because most people speculate with relatively low amounts of money. Regulators did have discussions about the definition of binary options: were they games of chance or not? Since people are taking a big chance in just a short time, it can actually be seen as a type of gambling.
Ban on binary options by the ESMA
The European Securities and Markets Authority has delved into binary options and it’s not exactly positive about this way of speculation. It has been worried about investment products such as binary options. The ESMA has no decided to completely ban binary options. There will also be restrictions ‘Contracts for Differences’, which you might know as CFD’s. According to the ESMA, binary options are way too complicated and not transparent at all. What’s more, participants almost didn’t have a chance to win. Even worse is the fact that many providers of binary options were not even able to pay out the profits of a successful binary option.
Israel and binary options
European countries are not the first ones to ban binary options. The government of Israel already made this decision in 2017. It was a big blow for companies who sold binary options, because many of them were actually based in Israel. The decision of the ESMA will have a probably have a big impact on the European stock exchange as well. People cannot buy them anymore and commercials for binary options are forbidden. Before the decision was taken, Google already announced that it would not allow advertisements for binary options anymore. Soon you’ll be able to read the exact reasons for the ban on binary options in the European Union. ESMA will publish an official document on the website. The ban will be official after a one month waiting period.
Indictment in the United States
Two well-known websites for binary options were ‘Big Option’ and ‘Binary Book’. They’re having a lot of problems right now. Lee Elbaz, the owner of both websites, has been accused of misleading the American consumer. Elbaz was arrested at the New Jersey Airport last September, after he travelled from Tel-Aviv. The case is still pending, and more news will follow.