Home > Financial > Irish central bank bans binary options and restricts CFDs

Irish central bank bans binary options and restricts CFDs

Written by Business World, on 12th Jun 2019. Posted in Financial

article headline

Ireland's central bank announced permanent restrictions on the sale of complex derivatives to retail customers, a ban that will protect against large and unexpected trading losses.

The new measures consist of a permanent ban on the sale of binary options to retail investors and restrictions on the sale, marketing and distribution of so-called contracts for difference, mandating that retail investors cannot lose more money than they put into their CFD account.

The move followed similar bans introduced in April by Britain's financial watchdog and temporary interventions made by the European Union's Union financial-market watchdog, the European Securities and Markets Authority, last year.

It was the first time Ireland's financial regulator had used product-intervention powers introduced last year. The ban takes effect as soon as the EU curbs expire in July.

CFDs give an investor exposure to price movements in securities without owning the underlying asset. Binary options allow people to bet on whether the price of a share, currency or index will go up or down within a certain time.

"They are no more an investment than betting on a horse," Derville Rowland, the central bank's director general for financial conduct, said of binary options. The options are a "fundamentally flawed product" with no place in the investment plans of retail investors, he said.

"Based on our ongoing work on CFDs at a domestic and EU level, we have concluded that retail investors must be protected from excessive levels of leverage, which can result in unexpectedly high levels of losses and from the risk of losing more money than they put into their CFD account."

A central bank inspection published in 2015 found that 75% of retail CFD clients lost money. The average loss was 6,900 euros, the regulator said.

A follow-up review of a sample of the largest CFD providers in Ireland found that, in the two-year period up to Dec. 31 2016, 74% of retail clients lost money, with the average loss 2,700 euros. (Reuters)

Source: www.businessworld.ie

More articles from Financial

image Description

Master International Business Transactions with These Top Payment Systems!

Read more
image Description

Ireland was fastest growing economy in Europe in 2022

Read more
image Description

Irish budget position was strongest in euro area

Read more
image Description

6 in 10 Irish consumers have no extra money left at the end of the month

Read more
image Description

Inflation is the number one concern amongst Irish consumers

Read more