CP18/37: Product intervention measures for retail binary options

Open consultation: CP18/37
07/12/2018
Consultation closes
07/02/2019
07/02/2019
Policy statement and final Handbook rules
March 2019

In this paper, we propose permanent rules to prohibit the sale, marketing and distribution of binary options to retail consumers by firms that carry out activity in, or from, the UK.

Read CP18/37 (PDF)

Binary options or binary bets are financial products that involve an investor ‘betting’ on whether an event will happen or not. The potential outcome is predetermined, with an investor usually losing their initial stake if their prediction is incorrect, or receiving a fixed pay-out if they are correct. 

We have significant concerns about investor protection from the sale of binary options to UK retail consumers. This is based on evidence of aggressive and/or misleading marketing of these products, their inherent complexity and lack of transparency, and the level (and speed) of retail consumer losses experienced when trading binary options.

This Consultation Paper (CP) follows the European Securities and Markets Authority’s (ESMA) temporary EU-wide prohibition on the sale of these products to retail consumers. This CP also follows the FCA’s consultation in December 2016 (CP16/40), which included a discussion on potential approaches to binary options. We did not proceed to publish any domestic proposals following CP16/40 due to prospective action by ESMA.

While this CP proposes making ESMA’s temporary product intervention permanent, our domestic ban will also include ‘securitised binary options’ as defined by ESMA, which it excluded from its measures. In our view, these products pose similar investor protection concerns as other types of binary options sold to retail consumers.

Who this applies to

Our proposals will primarily affect:

  • retail clients or prospective retail clients who invest in binary options
  • firms marketing, distributing or selling binary options in, or from, the UK to retail clients
  • UK branches of third country investment firms marketing, distributing or selling binary options

Our proposals may also be of interest to:

  • consumer bodies

The CP also outlines the potential implications of the UK’s exit from the European Union.

What you need to do

Please send us your comments by 7 February 2019.

Online response form

You can also:

  • email your responses to [email protected] or
  • write to: Wholesale Conduct Policy, Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN

Next steps

We will consider feedback on our proposals and aim to publish a Policy Statement and final Handbook rules by March 2019.