LONDON (Reuters) – The securities watchdog of the European Union has banned the sale of & # 39; binary & # 39; options extended to retail customers by a further three months, starting on 2 October, with the announcement that there is still concern about the risks of the products.
The European Securities and Markets Authority (ESMA) launched the ban on July 2 in the midst of concerns about the losses on options, which give an investor exposure to price movements in securities without actually owning the underlying assets.
"ESMA believes that there is still a major investor-protection issue with regard to offering binary options to private customers," the regulator said in a statement.
ESMA said that certain longer-dated binary options would be excluded from the renewed ban, as well as those where the investor's capital is not at risk.
ESMA has expressed concerns about how these inherently high-risk speculative products are offered to retail investors, potentially leading to significant losses, and announced plans in December to ban their sales, which tumbled out shares of spreadbetting companies.
The main providers whose shares have been affected by the ban are IG Group (IGG.L) and CMC markets (CMCX.L).
An analysis of EU trade shows that 74-89 percent of retail accounts usually lose money on their investments, with average losses per customer of 1,600-29,000 euros ($ 1,830- $ 33,167).
ESMA will have to renew the ban in another three months or it will automatically expire.
($ 1 = 0.8744 euros)
Reporting by Lawrence White; Edited by Mark Potter