BaFin about to ban Binary Options

We all know what type of adversity Binary Options have faced. The trading style itself has always been regarded as something unproductive or even unhealthy for many traders. There was no surprise for this kind of attitude as the style does have a gambling undertone to it. Which inevitably, makes it prone to a lot of scamming activities.

Germans are people that like everything to be in order. I mean this as a compliment as nobody can really compete with them in terms of efficiency. It is a natural occurrence that the German watchdog has been keeping a keen eye on Binary Options as a whole. But today, they decided to step it up a notch and decided to outright ban Binary Options trading for retail traders.

According to analysts at BinaryOptionsNow the ban was not a surprise as BaFin has been hinting to it for quite a while. Plus the German watchdog is operating under ESMA’s temporary product intervention measures, MiFID. The announcement of the ban came from BaFin directly as they posted on their website that anything connected to the marketing, sale and distribution aspect of Binary Options will indeed be receiving a permanent ban on German grounds.

However, the watchdog didn’t commit to the ban without proper explanation and argumentation. Elisabeth Roegele, who is BaFin‘s Executive Director, highlighted the fact that Binary Options use “shady” marketing strategies to attract small investors, hinting at the low-interest rate. She brought examples of companies offering high returns with little to no risk, you and I both know that this isn’t the case, but there are many out there who haven’t even heard of Binary Options, so it’s easy to see BaFin’s concern.

Why are Binaries so disliked?

BaFin was able to illustrate their dislike towards the trading style, documenting it as addictive and “gambly”. There’s little room to disagree. Let me try and explain how Binary Options work. You make a “call”, for example you say that within the next minute, the price of the dollar will increase, and you put $100 on that, if you are right, you’ll get 80% of the money you bet, which means you’ll get $180, including the initial $100. However, if you’re wrong, you lose all of those $100. So you see, there’s no real way to predict the price change within a minute, an hour or even a day, thus we are left with nothing but gambling and guessing. It’s like a roulette.

BaFin states arguments directly correlating to the points I made in the explanation. They condone the way Binary Options are traded. The risk factor is not disclosed to the traders and in many cases, the broker themselves are direct counterparties to their clients.

Brokers now have until 20th of December 2018, to give their comments about the whole situation, most likely there will be no compromises or restricting Binary Options to a new regulatory framework, but still, a space to voice their opinions is something brokers should appreciate. The next discussion and overview of the measures will be happening on the 2nd of January 2019, where most likely the ban will be wholly approved.

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Konstantin Rabin

About the Author: Konstantin Rabin

Konstantin has been working in the financial services industry since 2011. He is over-viewing various updates in the technology, regulation, and market movements. He's passionate about games and has a cute cat named Dog.

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