The European Securities and Markets Authority (ESMA) has announced that it is renewing the prohibition on the marketing, distributing or sale of binary options to retail clients. The prohibition has been in effect since 2 July 2018, and will extend for a further 3-month period from 2 October 2018.

However, ESMA has agreed to two exceptions to the prohibition that will be kept under review during the prohibition period:

  1. a binary option for which the lower of the two predetermined fixed amounts is at least equal to the total payment made by a retail client for the binary option; and
  2. a binary option that fulfils the following three conditions:

i) the term from issuance to maturity is at least ninety days;

ii) a prospectus drawn up and approved in accordance with the Prospectus Directive is available to the public; and

 iii) the binary option does not expose the provider to market risk throughout the term of the binary option and the provider or any of its group entities do not make a profit or loss from the binary option, other than previously disclosed charges.

ESMA intends to adopt the renewal measure in the coming weeks, after which an official notice will be published the ESMA website. The measure will then be published in the Official Journal of the EU before entering into force on 2 October 2018.