After losses of close to half a million dollars, ASIC extended its product intervention order prohibiting the sale and issue of binary options to retail customers.
The corporate regulator confirmed that the ban will remain in effect until October 2031. It was first implemented on Monday, 3 May 2013. This follows a conclusion by the corporate watchdog that binary options had caused and are likely to cause significant harm to retail clients.
The corporate regulator stated that “ASIC’s extension to the product intervention order ensures that binary option protections for Australia remain in line avec those in force on comparable markets overseas.”
ASIC made the decision to extend the order after a detailed analysis of its impact using data from licensed binary options brokers and issuers. The analysis covered approximately 13 months prior and eight months following the order’s issuance.
ASIC discovered that retail clients suffered significant net losses in trading binary options over the period of 13 months ending on 3 May 2021. Retail clients suffered losses of between 74 and 77 percent when trading binary options. In total, retail client accounts lost $14 million. Profit-making accounts had net profits of $1.7million.
Karen Chester, ASIC deputy chair, stated that binary options were “harmful, high-risk financial instruments that result in millions of dollars losses for retail investors prior to our ban.”
“Extending our ban on binary options until 2031 will ensure that this important protection for retail investors continues.”
Binary options offer a “all or nothing” payout structure. This means that either the retail client loses their entire investment amount, or the contract can be terminated. You can also trade them for a shorter period of time with only one provider, which is less than six minutes.
Following submission of ASIC’s report and recommendation, Stephen Jones, Assistant Treasurer and Minister For Financial Services, approved the 10-year extension.
According to the corporate regulator, a shorter extension would need to be considered if it should be extended again. This would add cost and effort to ASIC as well as industry.