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IMPORTANT UPDATE AND WARNING:

We have recently received complaints and read many negative reviews on the internet about regulated binary options brokers using indecent practice towards traders. Although some binary brokers may be regulated, we do not recommend opening a trading account with ANY broker, be it a regulated broker or a non regulated broker, as THEY ALL seem to be unethical and non-trustworthy, even the regulated ones! If you have been scammed by such a company you can check out our RECOVER FUNDS FROM BINARY SCAMS section.

Also, instead of trading binaries which are mostly scams, you can trade with a trustworthy and popular FOREX broker such as FXORO.



ESMA (European Securities and Markets Authority) – No More Binary Options Bonuses – (MiFID) Retail Investors Q&A Update


View original document here: 
https://www.esma.europa.eu – Relating to the provision of CFDs and other speculative products to retail investors under MiFID


From “European Securities and Markets Authority” Original Document:mifid-logo

ESMA considers that the following poor practices, which have been observed in this sector of the market, are not consistent with the requirement for a firm to act honestly, fairly and professionally and in the bests interests of its retail clients (Article 19(1) of MiFID) and, in some cases, other relevant MiFID obligations:

  • A bonus or trading benefit being offered and presented to the client in such a way as to give the impression that the trading benefit is real money, free trades or riskfree trades, when in reality that trading benefit equates to additional leverage on the client’s account (and therefore additional risk);54

  • Firms awarding virtual sums of money as bonuses that in practice would be impossible or rarely possible to convert to real-life client funds that can be withdrawn (e.g. as a result of the criteria that the client is required to fulfil to realise the bonus); 54 Information presented to clients and potential clients should be clear, fair and not misleading as required by Article 19(2) of MiFID. 59

  • Where a bonus has been awarded, firms presenting misleading information on the trading platform about the retail client’s account balance, such that the retail client is not able to readily distinguish between ‘virtual’ sums on the account and actual client funds that can be withdrawn at that point in time (e.g. including both real-life client funds and the ‘bonus’ in the total balance of the client’s account that is displayed online);

  • Firms not being able, at any time and without delay, to distinguish client assets from any ‘virtual’ balances, such as bonus amounts or other trading benefits awarded on the client’s account that do not equate to actual funds or instruments held for the client; 55

  • Trading benefits being applied to a client’s account as the default option or requiring the client to ‘opt out’ of receiving a trading benefit, such that the client may not be aware that he or she has received the trading benefit;

  • Firms not allocating profits generated from trades derived from a bonus to the client; and

  • Firms refunding sums owed to the client in the form of a bonus instead of in cash.

 


What Does This Mean?

This ESMA update of their official Q&A document probably means that all European binary options regulators operating under MiFID laws will have to update the way they regulate binary options brokers. This means that regulators such as CySEC, FSMA, FCA, AMF, AFM, MFSA and other EU regulators will also have to change the way they discipline licensed brokers, seeing binary options bonuses as “poor practice”.


The Use of Trading Benefits When Offering CFDs or Other Speculative Products (such as binary options)

The ESMA (“European Securities and Markets Authority”) has totally changed their view of “trading benefits” such as bonuses and on their website, the official Q&A “Relating to the provision of CFDs and other speculative products to retail investors under MiFID” has been seriously updated with a whole new section called “Section 6: The use of trading benefits when offering CFDs or other speculative products” the new sections states the following:

It has been observed in this sector of the market that firms may offer trading benefits to attract and encourage retail clients to speculate in CFDs or other speculative products. For example, “bonuses” may be promoted as an introductory offer to new retail clients, or as a reward for existing retail clients that invest a certain sum of money with the firm. Given the complex and speculative nature of the products, it is especially important for NCAs to consider the use of trading benefits by firms offering CFDs and other speculative products to retail clients, in order to ensure that the MiFID obligation to act honestly, fairly and professionally and in the best interests of clients (Article 19(1) of MiFID) is met. 2. This section describes some bad practices relating to the use of trading benefits that have been observed in this sector of the market and highlights the key considerations that NCAs should take into account as part of their supervisory activity.

The new section goes on an on about how giving bonuses are a “bad practice” and how it poorly affects trader behavior and psychology. How bonuses “lure in” traders that do not have enough experience and do not understand the risks of trading binary options and how the bonuses tend to make traders engage in highly risky trading activities that they usually would not try, if it were not for the bonus.