The ESMA Ban – And what it means for Trading

How The Binary Options Ban Is Affecting Traders

In July 2018, the European Securities and Markets Authority (ESMA) has officially forbidden the promotion, distribution or sale of binary options. The ban is temporary, for a three month period, with the option of extension when the period runs out. 

Since then ESMA has continually extended the ban, and they have just announced they will do so again. The current period is up on January 2nd, 2019. It looks like the authorities will keep renewing the ban indefinitely. EU traders are therefore not going to be trading Binary Options with the regulated brokerages in the near future. 

ESMA Extends Ban On Binary Options

So, all in all, the ESMA restriction on binary options has been extended once more, and it looks like the ban is going to stay. So with an overall restriction on the advertising and sale of binary options in Europe, is there anything traders can do to keep trading? 

Some of the Binary Options are still allowed

Currently, it looks like there is a situation that doesn't leave much room fort he interpretation. As stated above, the binary options can't be advertised, sold or distributed. However, there are a couple of exceptions. ESMA has decided to allow some forms of Binary Options. 

Be that as it may, as you will discover straightaway, these exemptions are not practical and they seem hard to implement while making enough money. 

Exemption 1: A binary option where the lower of the two pre agreed amounts is at equal or greater than the total payment made by a retail client (trader) for the binary option, including any fees and other costs 

That is undeniably a White Unicorn. It fundamentally means that on some random exchange the most noticeably terrible result is you recover your cash, including all commissions and charges. The other result is to win the whole payout. There are no platforms that would offer that kind of deal. 

Exemption 2: A Binary Options that meet the following three conditions at once: 

  • the expiration time of minimum 90 days 
  • an outline drawn up and endorsed as per the Prospectus Directive (2003/71/EC) and available to the public
  • “the binary option doesn't open the provider to showcase hazard all through the term of the binary option and the provider or any of its gathering elements doesn't make a benefit or misfortune from the paired choice, other than recently revealed commissions, exchange expenses or other related charges”. 

While the initial 2 conditions are truly direct, the last one may require a touch of clearing up: the trader ought to have no enthusiasm for the result of the exchange. As such, the old circumstance where the brokerage would profit when you lose a trade would completely disappear. 

Keep in mind that each of the three conditions has to be present at the same time, so it will be incredibly hard for a brokerage to have them all. 

Can you continue trading?

To put it plainly, yes. There are some practical approaches to maintain trading. One decision we won't advise is going to unregulated agents – this is very risky and loaded with frauds, to the point where it shouldn't be considered. One drawback to the ban is that it does nothing to address the scams: they are outside of the law in any case, and the ban won't change that (It might even encourage scammers as they probably are aware the European controller has no hunger to pursue them). Just utilize directed agents. So all things considered, let us proceed onward to some certified ways you can continue exchanging; 

Going Professional

This decision might be available to specific traders. You have to demonstrate a decent amount of trading experience, and capital. If you can do that, you can enlist as an expert broker. This makes you absolved from the ESMA rule transforms (As you are never again a ‘retail' speculator). Representatives can legally offer you binary options once more. The drawback is that you are no longer regulatorily protected. It's because you are fundamentally saying you are experienced enough to use high-risk financial products. It is a very good decision for experienced traders and undoubtedly, many have just made this move to keep trading in the same way as they were before the ban. Some of the most trusted binary options brokers are: IQ Option, AVAtradeOlymp trade.

Ask Your Broker

This choice needs some investigative work. Numerous merchants have different ‘arms' all under a single brand. For instance, they may have a European based organization, controlled in Europe, and another organization enrolled in Australia or Malaysia to support each market. As a retail trader, you can demand a record with one of the other foreign or non-European organizations, however with a similar brand. 

ESMA will enable European brokers to exchange under an alternate arm of a similar brand – as long as the request originated from the trader.  The Brand is not allowed to use this as a possibility for their clients. ESMA has just denounced two or three brands for trying to do just that. Be that as it may, as long as the request originates from you, the trader, at that point, it is alright for the representative to encourage that change for you. When working under another managed arm of the business, you can get to binaries once more. 

So checking whether your broker has regulated branches in different jurisdictions could be a solution for you.

Other Trading Options

Numerous brokers have created similar products to binary options, yet made them distinctive enough to avoid the ban. These incorporate FX Options and Knock-Outs. Anticipate that more should follow. A large number of strategies you used for binaries still work. However, ESMA is viewing these items intently. In the event that they feel the ban is being ridiculed, they may demand the new products are banned as well. 

Another option which is also highly popular is the binary options robot trading system where a robot is trading on your behalf and your instructions. One of the best robots on the market is the option robot.

So with these options, it is possible to continue trading, potentially without leaving your present broker. There is no reason to take a think about unregulated brokers. There you have it, the ban on binary options doesn't mean you have to stop with binary trading.