ESMA lifts ban on binary options in the Europian Union

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ESMA did not extend the ban on binary options trading in the European Union

July 1, it became known that ESMA ceases its temporary ban on marketing, advertising and the sale of “binary options” for retail customers from the European Union. Definitely, this is a mutual reason for joy for both unprofessional traders and trading platforms from the European Union. Advertising, like the most binary options, was inaccessible to ordinary traders with the EU for a long time. Professional traders had access to the binary options of the EU. But, especially from the latter, they did not hear anything whether there were difficulties and who fell under the classification of professional traders. Many of the platforms, according to the bad tradition that took place in the field of binary options, refused to follow the decree of the regulator. And they were left without a license. Many chased at all. In general, this was not news for the industry, but innocent traders and options have suffered. But, traders who remember the “Israeli stage” of binary options were not very surprised by this turn of events.

What has changed during this time in the binary options industry

Analyzing many other sources of information, we can highlight a positive trend in the field of binary options. Old projects were chipped, not so many new players appeared on the market. Most of them have become more conscientious about their customers (traders). Trading has now become much more relaxed even outside the European Union. The market was redistributed among large companies that occupy leading positions in this industry. It should be noted the growing interest in binary options from Latin America, Indonesia, Thailand, China and other countries of the world. Earlier, the popularity of options was concentrated to a greater extent in the countries of the European Union and the CIS. Now, in the light of recent events, we see a good upward trend in the options market around the world. Many analysts fear deja vu amid past events. But, such a scale as before will not be. Traders have become more vigilant and more careful about choosing a trading platform.

The real situation after the lifting of the ban on binary options in the European Union

First of all, it should be noted that none of the major brokers is in a hurry to return binary options for the EU countries. They were successfully replaced by FX options, which became an alternative for many traders. They did not manage to get wide distribution. Affordable forex options are still available at several major brokers. Some time later, after the ban was officially lifted, we did not notice that trading platforms began again to offer binary options trading to traders from EU countries. We will keep track of this moment in the future. Nevertheless, we hope that after a long pause, binary options will begin to return to the European Union in small steps. In the meantime, there are many other trading tools that have managed to replace options for many traders during their absence. The long return of binary options to the European Union is also evidenced by the low interest of potential traders in search engines. All these factors influence the return of many beloved trading instruments to Europe by many.

ESMA is watching you

The official lifting of the ban on binary options has not caused much excitement, as many expected. Everyone knows the cool temper of this regulator. First, hold the toy in your hands, and then pick it up. In its official publication, ESMA made it clear that it will continue to monitor this trading instrument and tighten control over it. Such a trial period, which is not defined by the time frame. What will happen from this – directly depends on binary options brokers. To be honest, from the good faith of the latter. If everything goes well, then binary options have a very good chance to return with new forces to the European market. Will it be? It all depends on brokers to a greater extent and the awareness of most traders. With their increased vigilance to brokers, fraudsters will find it very difficult. Their life cycle will become very short. With the assistance of ESMA, we will get a good bunch to limit the influence of such companies on the authority of a trading instrument.

Conclusion

I would like to note a positive trend in all of the above. After all, we will witness a new stage in the development of binary options as a trading tool. If everything goes smoothly and in the EU, trading platforms will return binary options for trading to ordinary traders. And, this will not cause negative consequences, the growth and popularity of this trading instrument will increase significantly. And, as it really will be, time will tell. Follow binary options with us. We have a lot of useful information on the site. See you in new publications.

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

ESMA lifts ban on binary options in the Europian Union

The European Securities and Markets Authority (ESMA) has agreed on measures on the provision of contracts for differences (CFDs) and binary options to retail investors in the European Union (EU).

The agreed measures include:

1. Binary Options – a prohibition on the marketing, distribution or sale of binary options to retail investors; and

2. Contracts for Differences – a restriction on the marketing, distribution or sale of CFDs to retail investors. This restriction consists of: leverage limits on opening positions; a margin close out rule on a per account basis; a negative balance protection on a per account basis; preventing the use of incentives by a CFD provider; and a firm specific risk warning delivered in a standardised way.

In accordance with MiFIR, ESMA can only introduce temporary intervention measures on a three monthly basis. Before the end of the three months, ESMA will consider the need to extend the intervention measures for a further three months.

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Significant Investor Protection Concern

ESMA, along with National Competent Authorities (NCAs), concluded that there exists a significant investor protection concern in relation to CFDs and binary options offered to retail investors. This is due to their complexity and lack of transparency; the particular features of CFDs – excessive leverage – and binary options – structural expected negative return and embedded conflict of interest between providers and their clients; the disparity between the expected return and the risk of loss; and issues related to their marketing and distribution.

NCAs’ analyses on CFD trading across different EU jurisdictions shows that 74-89% of retail accounts typically lose money on their investments, with average losses per client ranging from €1,600 to €29,000. NCAs’ analyses for binary options also found consistent losses on retail clients’ accounts.

These measures were agreed by ESMA’s Board of Supervisors on 23 March 2020.

Steven Maijoor, Chair, said:

“The agreed measures ESMA is announcing today will guarantee greater investor protection across the EU by ensuring a common minimum level of protection for retail investors. The new measures on CFDs will for the first time ensure that investors cannot lose more money than they put in, restrict the use of leverage and incentives, and provide a risk warning for investors. For binary options, the prohibition we are announcing is needed to protect investors due to the products’ characteristics.

“The combination of the promise of high returns, easy-to-trade digital platforms, in an environment of historical low interest rates has created an offer that appeals to retail investors. However, the inherent complexity of the products and their excessive leverage – in the case of CFDs – has resulted in significant losses for retail investors.

“A pan-EU approach is required given the cross-border nature of these products, and ESMA’s intervention is the most appropriate and efficient tool to address this major investor protection issue.”

CFDs – agreed measures

The product intervention measures ESMA has agreed under Article 40 of the Markets in Financial Instruments Regulation include:

1. Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, which vary according to the volatility of the underlying:

· 30:1 for major currency pairs;

· 20:1 for non-major currency pairs, gold and major indices;

· 10:1 for commodities other than gold and non-major equity indices;

· 5:1 for individual equities and other reference values;

· 2:1 for cryptocurrencies;

2. A margin close out rule on a per account basis. This will standardise the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more retail client’s open CFDs;

3. Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses;

4. A restriction on the incentives offered to trade CFDs; and

5. A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.

Next steps

ESMA intends to adopt these measures in the official languages of the EU in the coming weeks, following which ESMA will publish an official notice on its website. The measures will then be published in the Official Journal of the EU (OJ) and will start to apply one month, for binary options, and two months, for CFDs, after their publication in the OJ.

European Union bans binary options, strictly regulates CFDs

Vise tightens around Israeli online scammers; Israeli banks close forex companies’ accounts, and Twitter follows Google and Facebook in banning cryptocurrency ads

Simona Weinglass is an investigative reporter at The Times of Israel.

The European Securities and Markets AuthorityВ announced В that it is banning binary options and placing restrictions on the sale of contract for differences (CFDs) to retail investors.

Binary options and contracts for differences are financial products that are frequently abused by cybercriminals to perpetrate online investment scams.

Beginning in the middle of the last decade, a multi-billion dollar online trading industry developed in Israel that offered binary options, forex and CFDs to ordinary, unsophisticated investors in Israel and abroad. Much of the industry perpetuated fraud against its investors, earning money when the investors lost money. The fraudsters lied to the investors about the potential for profit and about the identities and locations of its “brokers,” and frequently disappeared with the money when investors attempted to withdraw profits.

Many binary options, forex and CFD companies have operated from Israel with no regulation whatsoever, while others found a friendly regulator in the Cyprus Securities and Exchange Commission (Cysec), which allowed them to legally offer their products throughout the European Union. Binary options were largely an Israel-centered industry while forex and CFDs are peddled by Israelis, Cypriots, Russians and others.

ESMA, the European Union’s financial regulator, said Tuesday it will publish the new rules in the Official Journal of the European Union in the coming weeks. The binary options ban will go into effect a month from the date of publication, and the new rules applying to CFDs will go into effect two months from their publication.

One industry expert described ESMA’s decision, however, as akin to “closing the barn door after the horse has escaped.” Andrew Saks-McLeod, the editor of the FinanceFeeds trade publication, has long been critical of the binary options industry and has sought to draw a distinction between those online trading websites he views as legitimate and those that are frauds.

Saks-McLeod told The Times of Israel that since Israel passed a law banning binary options in October 2020 — as a direct consequence of Times of Israel investigative reporting on the fraud — most Israeli binary options operatives have been selling cryptocurrencies instead. The ESMA’s ban on binary options, he warned, will do little to stop the phenomenon of investment scam boiler rooms operating from Israel and other jurisdictions with lax law enforcement.

“I’ve noticed most of the Israelis in Cyprus who used to sell binary options are now offering ICOs [initial coin offerings]. They don’t even need a license from Cysec to offer these products and the investor who loses all his money has no legal recourse,” he said.

ESMA’s binary options ban will consist of a “prohibition on the marketing, distribution or sale of binary options to retail investors,” according to a March 27 ESMA press release.

The contracts for differences regulation will restrict the amount of leverage that can be offered to retail investors, will not allow investors to lose more than they invested, and will prevent the use of “bonuses” and other incentives to trade. The new rules will initially apply for three months and will be extended as ESMA deems necessary.

Twitter follows Facebook and Google

ESMA’s announcement came a day after Twitter announced a ban on ads for cryptocurrencies and ICOs. The company had said it would no longer advertise binary options in August 2020.

Less than two weeks ago, the internet giant Google announced that beginning in June, it will restrict the advertising of contracts for difference, rolling spot forex and financial spread betting, as well as enforce an outright ban on advertising for binary options and cryptocurrencies.

Google’s move is perceived as the greatest blow yet to fraudulent cryptocurrency, binary options, forex and CFD websites.

Facebook banned ads for binary options, cryptocurrencies and ICOs in January.

In its press release, ESMA explained that it considered CFDs and binary options potentially dangerous to investors. CFDs pose a risk because of “excessive leverage” while binary options have a “structural expected negative return and embedded conflict of interest between providers and their clients.”

Despite the fact that Israeli law enforcement has yet to indict a single binary options fraudster, operatives are facing legal troubles from other directions.В Several alleged operatives are facing lawsuits from investors abroad. Meanwhile, Israeli banks have closed the accounts of Israel-based forex companies.

Four lawsuits have been brought against Banc de Binary and the Israeli company that operated the site, owned by Oren, Hezi and Lior Shabat, according to Israel’s corporate registry. The first lawsuit, for NIS 360,060 ($103,275), was filed by a 69-year-old man from Finland through his Israeli lawyers Adam Ashkenazi and Raouf Najar. The Finnish man lost a total of 88,250 euros ($110,000) to the company and as a result fell into a deep depression, suffered the demise of his marriage, moved out of his home, and has been compelled to return to work in his retirement.

In their response to the complaint, Oren Shabat and the local Israeli company Global App Technologies Ltd. asserted that the investor had signed an agreement acknowledging that he understood the risks involved in trading binary options. The defendants also claimed that the investor had signed a document giving up his claim to some of his money.

A plaintiff in a separate case brought by attorneys Ashkenazi and Najar is a 62-year-old musician and music teacher from Switzerland who is suing Banc de Binary and Oren Shabat for 460,168 shekels ($132,000). The amount was his pension, which he lost in its entirety.

“He lost his entire pension while the defendants live in luxurious houses and drive fancy cars,” the man’s lawyers wrote in the complaint.

In addition, two alleged victims of the binary options website TitanTrade filed lawsuits against MIG GA Marketing Finance Ltd. (which has since changed its name to Gtech Media Development Ltd), a company registered in Israel at 13 Tuval Street in Ramat Gan whose director is Guy Galboiz.

The first lawsuit was filed by a Polish woman who was suing the company for $93,000 or 358,050 shekels. Her lawyers, Nir Friedman and Yossy Haezrachy, claimed that MIG GA Marketing Finance Ltd. employed skilled salespeople who represented themselves as working for TitanTrade.В MIG GA Marketing Finance Ltd. countered that there was a lack of privity between the plaintiff and defendants since MIG GA Marketing Finance Ltd. is an Israeli company that merely provides services to foreign companies and is not the company that transacted with the plaintiff.

In a separate lawsuit, a Lithuanian man was suing Guy Galboiz and Gtech Media Development for NIS 76,720 ($22,000).

The lawsuits were withdrawn before they reached the evidentiary stage. The Times of Israel has been told that the plaintiffs requested to withdraw the lawsuits and also stated that they had no cause for action against Gtech. The plaintiffs did so because as the proceedings were commencing, the plaintiffs received all their money back from TitanTrade, even though TitanTrade was not the defendant.

Other lawsuits making their way through Israeli courts include a $382,422 lawsuit by an Australian man against Roey Shagan and Paperclick Marketing Ltd. The man claims to have been defrauded by 365BinaryOptions.com and that Paperclick Marketing ran the website.

A Canadian man is suing another Israeli company, IGMD Ltd., owned by Yehoram and Shay Hillel, for $54,436. His lawyers are Adam Ashkenazi and Raouf Najar and the man claims he was defrauded by the binary options website OptionBit.com.

Earlier this month, a Tel Aviv District Court ruled against Haim Toledano and his company Toyga Media Ltd., which is associated with the website UFX.com. Toledano had sued Israel’s First International Bank for closing his account, unlawfully, he claimed.

The bank argued that the activity in the company’s accounts raised many red flags for possible money laundering and that the bank was within its rights to close the account. The judge agreed with the bank. Israeli banks have been stepping up their anti-money laundering due diligence in the last year in an effort to comply with new laws passed by Israel’s Knesset whose purpose is to help Israel meet international anti-money laundering standards.

Toyga and Toledano are currently fighting a similar legal battle against Israel’s Mizrahi Bank, which also took steps to shut down their bank accounts. An email sent from one of the bank’s compliance officers to other staff members, that was revealed in the lawsuit’s discovery process, hints that the closing of Toyga’s bank account may not be an isolated case, and that it may become increasingly difficult for Israeli forex, CFD and cryptocurrency companies to maintain bank accounts in the country.

On November 22, 2020, Amos Lottem, a compliance officer for Bank Mizrahi told other staff members that they cannot accept further money transfers into Haim Toledano’s bank account.

“The money comes from offshore, with no explanation of its source,” he wrote, “The companies he reported receiving money from in the past operate without a license and he himself is under investigation by the Israeli Tax Authority. Until we get all the proper documents proving the source of the money and that he paid taxes on it, we cannot accept the money.”

In his complaint, Toledano disputed the bank’s findings and claimed the source of the money was dividends from legitimate business activity.

In an email dated December 13, 2020, Lottem suggested that the bank had scrutinized the activity of other forex companies as well.

“Haim Toledano has a forex company in Cyprus and he also operates ‘marketing’ and ‘call centers’ for additional forex companies. This is similar activity to the activity of IDI Ventures at Branch 36 and to RBPKR.”

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