The new rules tackle concerns about the inherent risks of these products, and the poor conduct of the businesses selling them. This has led to consumer harm in the UK and internationally through large and unexpected trading losses, according to FCA’s official announcement. The FCA estimates the permanent ban on binary options could save retail consumers up to GBP 17 million per year, and may reduce the risk of fraud by unauthorised entities claiming to offer these products.
The FCA’s rules are in substance the same as the European Securities and Markets Authority’s (ESMA) existing, EU-wide temporary restrictions on binary options. However, the FCA is also applying its rules to so-called ‘securitised binary options’ that were excluded from ESMA’s prohibition. Securitised binary options are not currently sold in or from the UK. The FCA thinks these products pose the same risks for investors and so are extending the scope of the prohibition to prevent a market developing for these products.
The FCA’s rules are permanent and came into force on 2 April 2019.
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