ESMA extends binary options limits to July 2019

Ted Capwell

If you study the structure of the global financial market (more precisely, the segment where operations are carried out online), you can see that over the past decade there have been global changes. And even well-known and reputable economists cannot give them a definite assessment.

Among the most important events that led to global changes in the global financial system are the following:

• The emergence and development of cryptocurrency.

• Practical application of blockchain technology.

• The rapid development of online trading.

• The emergence of new financial instruments and assets (including binary options).

• The unprecedented growth in the volume of speculative operations on the stock exchanges, stock and currency markets.

• Unsuccessful attempts of the countries-leaders of the world economy to create a legislative framework for monitoring the situation on financial markets.

In addition to the above items, it is necessary to remind readers of the previously unprecedented rate of development of fraudulent schemes in the online trading system, as well as unsecured loans. In a stable economy, they do not represent a real threat, and during a crisis – they can play the role of a time bomb. But, of course, we should not forget about the inability of the world economy to independently “balance” the imbalance between a developed and relatively rich Europe, the USA and poor states in Africa, South America and Asia.


ESMA extends the limit on binary options by June


Binary options in the EU, how it all began

Retail transactions in financial markets that allow traders to earn income can be divided into several groups (regardless of the specific asset):

1. You work with a decent broker who has licenses of authoritative regulators, own representative offices in many countries and impressive capital, which allows, in case of force majeure situations, to fulfill your financial obligations.

2. The trading floor is inferior in capitalization to the brokers of the previous group, but it enjoys prestige among traders and has a good reputation in the business world. Almost no one guesses that such companies have their own “skeleton in the closet” – in some situations, these brokers do not withdraw clients’ money to the real market. They can be used for short-term (and rather expensive) loans, and when it comes time to pay off investors, the company attracts the financial resources of other clients that help it fulfill its obligations. It is not strange, but such trading platforms work quietly for a long period of time (5-10 years), without fearing that someone will make any claims or charges against them.

3. And the last group – ordinary crooks and scammers. Their main goal is to get as much money as possible and disappear in order to organize a similar project again after a certain time.

Perhaps the readers of this review will not immediately understand why such a long introduction, because there is not a single word about binary options. The fact is that the emergence of this financial instrument from the first days of its existence caused a lot of contradictory reviews, reviews and forecasts. But the fact that brokers and the first and second groups did not refuse to work with binary options, can be considered proof of the legitimacy of such transactions.

Originating many decades ago on the Chicago Stock Exchange, this financial instrument was indeed proof that it gives the right to buy certain assets at a fixed price. These were real stock options. Decent European brokers believed that they would very soon create a market for the assets under consideration. But in fact, everything went wrong (let’s not look for the guilty, just consider the situation as a fait accompli).

In the online trading sector, the popularity of betting (bookmaker) options is growing every day. A simple algorithm for working with them attracts a huge number of users who did not understand what it was and were not going to delve into the essence of the matter. Naturally, small investors daily lost huge sums of money, which made them turn to the regulators so that they “deal with the scammers.” As a result, in July 2018, the ESMA (European Organization of Securities and Markets) granted the request of law-abiding EU citizens.

How was the “struggle” with binary options

Among the main reasons for the prohibition of binary options, the ESMA employees highlight the following:

• Protection of small investors from inevitable losses on operations with BO.

• According to many reputable financiers, such operations have nothing to do with the real economy.

• The unstable economic situation forces many EU citizens to risk the latest savings in order to improve their financial situation with BO.

• The events of 2016-2017 played a significant role, when well-known payment systems refused to cooperate with companies that traded BO, and some countries adopted their own laws prohibiting binary options (Israel, Belgium, France).

• Analysis of the activities of some European trading platforms showed that they are ordinary financial pyramids.

In addition to the BO, ESMA banned the activities of CFD brokers and strongly tightened requirements for leverage transactions.

What can traders planning today to work with?

Starting from July 2018, the ESMA holds meetings every 3 months regarding the future of BW. The leadership of many EU countries do not like this position, many of them argue that in the near future they will adopt their national laws, which will ban financial transactions with binary options forever.

The only indulgences for participants of the BO market were taken last fall, but they affected only long-term operations with minimal financial risk, as well as those market participants who can prove their professionalism in this field of activity. The next meeting of the ESMA will be held in June 2019, and the regulator may finally take a final decision on this issue.


“General Risk Warning: Binary options and cryptocurrency trading carry a high level of risk and can result in the loss of all your funds.”