The Australian financial market regulator, ASIC, confirmed the extension of the ban on the issue and distribution of binary options to Aussie retail clients until 1 October 2031 on Monday.
The product intervention order came more than a month before the expiry of the Australian Securities & Investments Commission’s (ASIC) original order for the ban which became effective from 3 May 2021 for 18 months.
Binary options are over-the-counter (OTC) instruments that allow investors to speculate on the occurrence or non-occurrence of an event in a definitive timeframe. These instruments are simple to understand but are very risky.
According to ASIC , its initial product intervention order banning retail binary options came as around 80 percent of the traders were losing money, which was found in regulatory reviews between 2017 and 2019.
Further, retail accounts trading binary options lost a net of AU$14 million in aggregate: the losses of loss-making accounts totaled AU$15.7 million, while profit-making accounts made AU$1.7 million.
“Binary options are harmful, high-risk financial products resulting in millions of dollars in losses for retail investors before our ban. Extending our binary options ban until 2031 ensures this important protection for retail investors will continue,” said Karen Chester, the Deputy Chair at ASIC.
Global Stance on Binary Options
Binary options products are banned in most of the other global markets. The United Kingdom, European Union, Israel and several other countries have also banned binary options due to the risks and rampant fraud using the instruments. Interestingly, the United States allows the retail distribution of binary options: the CME Group is also going to launch event contracts in a couple of weeks which are structured as binary options.
Meanwhile, ASIC is poised to tighten its regulations around the other retail OTC markets. On top of that, it brought heavy curbs on the maximum leverage that CFDs brokers can offer to retail traders.
