In recent months and years, investor complaints about fraud in binary options have become more frequent. Unregulated providers such as SafeMarkets or Option888 have ripped off hundreds of millions of euros from German investors, according to the competent authorities. The European Financial Market Authority ESMA has therefore already issued a temporary ban on binary options in 2017. The German financial market supervisory authority BaFin is now planning a permanent ban and has today sent out a corresponding draft directive.
Binary options have long been identified by regulators as a toxic product. According to the respective directive made on BaFin’s website, the marketing, distribution and sale of binary options to small investors is going to get banned. The German supervisory authority is thus preparing for the expiry of the temporary ban of the European Securities and Markets Authority (ESMA).
“Binary options are a particularly attractive offer for small investors, especially in the current low-interest-rate phase,” explains BaFin Executive Director Elisabeth ROEGELE. She highlights that the marketing binary options with a promise of high returns is making the product too risky for retail investors. “Practice has shown that these products for retail investors are extremely lossy and very risky,” Ms ROEGELE warned.
The interests of the providers would thus be in direct conflict with the interests of its clients. Providers could, for example, manipulate the price of the underlying asset when the binary option expires or change the maturity of the binary option by seconds or milliseconds in such a way that the option contract could not be paid out.
