Belgium goes Ballistic on Binaries (and forex)

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Belgium goes Ballistic on Binaries
(and forex)

I have some very good news and some very bad news.

The King of Belgium has issued a royal decree. It bans binary options. It bans cold calling. It bans bonuses. All of this is great for traders.

And it bans OTC forex and CFDs which use any leverage. That's a problem. Forex traders in Belgium lost their ability to trade because forex got lumped in with binary options. Forex traders around the world are having their ability to trade placed because of the binary options industry.

Here's the English version from the Belgian Financial Services and Markets Authority's website...

FSMA Regulation establishes a framework for the distribution of OTC Derivatives (Binary options, CFDs...)
The distribution of certain financial derivatives among Belgian retail clients will be restricted as from 18 August 2016. Certain derivatives such as binary options, CFDs with leverage, etc. may not be distributed, and certain distribution practices will also be prohibited. The Regulation drawn up by the Financial Services and Markets Authority (FSMA) on this matter has been approved by royal decree.


The Royal Decree of 21 July 2016 is published with today's date in the Belgisch Staatsblad/Moniteur belge (Belgian Official Gazette). The Royal Decree approves the FSMA's Regulation (published in French and Dutch) on the distribution of OTC derivatives. The Regulation applies to derivative contracts distributed to consumers in Belgium, usually from abroad, via electronic trading platforms.

According to the providers, these are products that can generate high yields at a time of historically low interest rates. In reality, however, these are products that are marketed aggressively and are extremely risky, often involving transactions over a very short period and without any connection to the real economy.

The Regulation consists of two elements which apply cumulatively. The first element is a ban on distribution of a few specific types of derivative contracts to consumers via electronic trading platforms. These are:

  • binary options: a binary option is a contract in which one party undertakes to pay the other party a specified amount if the value of a given asset (listed share, currency, commodity, index, precious metal, etc.) changes in a specified direction within a predetermined - sometimes very short - period (a few seconds or minutes);
  • derivative contracts whose maturity is less than one hour;
  • derivative contracts with leverage, such as contracts for difference (CFDs) and rolling spot forex contracts. A CFD is a contract between a buyer and a seller in which the parties agree to exchange the difference between the current price of an underlying asset (listed share, currency, commodity, index, precious metal, etc.) and the price of that asset at the end of the contract. A rolling spot forex contract is a type of contract for a foreign exchange transaction which is renewed indefinitely until one of the parties closes its position; at that point, the transaction is settled in cash on the basis of the changes in the underlying currency since the beginning of the contract.
The Regulation applies to unlisted, or 'over-the-counter' (OTC) derivatives. It does not apply to derivatives that are admitted to trading on a regulated market or on a multilateral trading facility. The Regulation supplements the distribution ban that was already in force for certain products, such as life settlements (traded life policies) and financial products with a virtual currency as their underlying.

The second element is a ban on a number of aggressive or inappropriate distribution techniques (cold calling via external call centres, inappropriate forms of remuneration, fictitious gifts or bonuses, etc.) used when distributing OTC derivatives to consumers.

The Minister for Employment, the Economy and Consumer Affairs, Kris Peeters, noted: ‘This Regulation contributes to better protection of consumers of financial products. Henceforth, it will be clear to everyone that binary options and other speculative derivatives have no place on the Belgian retail market.’

The Minister of Finance, Johan Van Overtveldt, remarked: ‘In recent years, we have seen a rise in the number of foreign offerors of products such as binary options that approach the Belgian market without having an authorization and /or a published prospectus. This Regulation will help combat such offers.’

Jean-Paul Servais, chairman of the FSMA, stated: ‘The FSMA has repeatedly issued warnings about the risks associated with these products. Other supervisory authorities and ESMA have done likewise. Yet the FSMA continues to receive complaints about these products. Therefore it proposed establishing a framework regulating the distribution of OTC derivatives and to prohibit the distribution of certain types of these products.


Link to original FSMA document
 
The binary options industry deserves this fully, it has too many unscrupulous characters taking advantage of the innocent. It is a shame that reputable FX traders will also be caught by the net that has been cast by the Belgian Government.
 
ALthough I agree that sometimes it is misleading and it takes too many losses and frustration to actually dominate it, I believe it is stupid to prohibit. It is people's money and you should not have a saying on what they want to do with it. There are people who like gambling and that is fine. I think they are just lazy to actually make proper regulations just like any other gambling centre. As long as this stays there I do not care.
 
HMMM.. binary kinda reminds me of hedging ban in some states of the US?
I've heard the sabre-rattlings of, public forex traders cause troublesome distortion in the money markets and should best be banned worldwide.
Will someone add to this?
 
This should be done the world over. Binary Options traders have ruined it for themselves, no matter what regulation is in place they skillfully skirt around it with the result being in traders pitted against a stacked deck. It is too simplistic to say people should do what they want with their money. Reality is, this is what governments are supposed to do, protect their people against criminals and scammers. We should be civilized enough to not have to live by the law of the jungle .... survival of the fittest, eat or be eaten. There is no reason to have a maze of laws to govern a legitimate investment scheme over and above what is already in place. Everyone who invest accepts a legitimate degree of risk, but to allow predators to prey on uneducated (in investments), or desperate people who are trying to better their financial standing and let them be taken advantage of is the same as throwing the arena doors open to a clutch of vultures drooling and salivating at the feast. These people are no different and worse than the ordinary mugger on the street. At least the street mugger has enough integrity to not pretend to be anything more than what he is. The legitimate investment community needs to demand better and stricter regulations and help enforce these regulations against the flim flam artists in their industry. This includes Forex and the rest. A paint brush does not always paint only the bad areas, it covers everything and everyone in its path and gathers momentum taking the bad and the legitimate over. It appears the painters are starting their job. Kudo's to Belgium and their King for responding to the interest of their people. Imagine .... a government and a King who actually love their people enough to protect them from criminals. Maybe there is hope after all.
 
Binary options should at the very least be regulated as outright gambling, which it is. Any form of representation or advertisement that this is an investment product should be banned. Given that these are mainly if not exclusively marketed on the internet, regulation and bans are problematical. Financial authorities should ban the hosting of BO companies within their jurisdictions. The Belgium ban may not stop them, but every little helps stop these scum.
 
//The Regulation applies to unlisted, or 'over-the-counter' (OTC) derivatives. It does not apply to derivatives that are admitted to trading on a regulated market or on a multilateral trading facility.//

Out of curiosity, does it not mean that a trader is free to open account in Nadex?
 
All the countries advised people " don't invest in the Binay industry"...there is no international regulation approved in this world ,European regulation is different from Asia, US, ...so Binary brokers use regulation to attract people because they think it's controlled by official authorities .........no ..if you invest binary be ready to lose your money it's like casino.
 
Even the word "invest" should not be used in relation to binary options. Would anyone say we're investing by putting a bet on a horse in the 4.15pm at Sandown? I doubt it somehow. Even using the word "trading" should also be banned. It is not a trade either. In a trade both parties get something. With binary options only one party gets something, the other party gets nothing, unless you count debt as a tangible something.
 
You only have to look at an ad for binary options "trading" (never described as such in these ads) to realize the slick, devilish temptations offered. They are indeed a danger to legitimate forex trading. The forex industry itself should try to educate the public about this.
 
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