ASIC extends binary options ban
The Australian Securities & Investments Commission (ASIC) has extended its ban on brokers offering binary options to retail traders until October 2031.
The regulator’s original order for the ban came into force on 3 May 2021, initially for a period of 18 months. ASIC said the extension of the product intervention order ensures Australia’s binary option protections remain in line with those in force in comparable markets overseas.
Binary options are over-the-counter (OTC) derivatives that allow clients to speculate on the occurrence or non-occurrence of a specified event in a defined timeframe. This can include an event related to movements in the price of a financial product, a market index or an economic event, such as central bank interest rate decisions.
While they are seen as simple to understand, they are also very risky.
In the 13 months before the ban took effect, ASIC found that retail clients incurred “significant aggregate net losses trading binary options”.
Between 74–77% of active retail clients lost money trading binary options, with retail client accounts racking up net losses of $14 million in aggregate. Breaking this down further, the regulator found loss-making retail client accounts made net losses totalling $15.7 million, while profit-making retail client accounts made net profits of just $1.7 million.
ASIC deputy chair, Karen Chester, said: “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.”
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