The UK Financial Conduct Authority has enacted a nationwide ban on the sale, marketing and distribution of binary options, stating the financial product operates in too similar a fashion to gambling.
Following recent temporary EU restrictions by the European Securities and Markets Authority, the FCA ruling extends the prohibition further, including “securitised binary options” – those formally listed, subject to a prospectus and operating on minimum contract periods.
“Binary options are gambling products dressed up as financial instruments,” said FCA executive director of strategy and competition Christopher Woolard.
“By confirming our ban today we are ensuring that investors don’t lose money from an inherently flawed product.”
Binary options allow users to bet on a yes or no proposition, such as achievable share price, and the securitised options are not currently sold in the UK, however the FCA instituted the ban to “prevent a market developing for these products.”
“The FCA estimates the permanent ban on binary options could save retail consumers up to £17m per year, and may reduce the risk of fraud by unauthorised entities claiming to offer these products.”
Following the ban, the FCA added that “any firm offering binary options services to retail consumers is likely to be a scam.”