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Regulators propose ban on advertising or trading in binary options

By The IJ Staff | April 27 2017 11:32AM

The Canadian Securities Administrators (CSA) are proposing to ban advertising, offering, selling or otherwise trading binary options to an individual. On April 26 they published a proposal for comment, National Instrument 91-102 Prohibition of Binary Options.

"We are deeply concerned by the increasing number of investor losses and complaints resulting from binary options," says Louis Morisset, chair of the CSA, and president and chief executive officer of Quebec financial sector regulator, the Autorité des marchés financiers. "The proposed ban is critical to our efforts to help stop binary options fraud in Canada."

Betting on the performance of an underlying asset

Binary options are wagers which consist of an investor placing a bet on the performance of an underlying asset, e.g. a currency, commodity, stock index or share. “In many instances, no actual trading occurs and the transaction takes place for the sole purpose of stealing money. In addition, those who have provided credit or personal information to binary options sites frequently fall victim to identity theft,” explains the CSA.

Other terms for binary options under which they are often marketed include: "all-or-nothing options," "asset-or-nothing options," "bet options," "cash-or-nothing options," "digital options," "fixed-return options" and "one-touch options."

Trading platforms often located overseas

The firms and individuals involved in binary options trading platforms are often located overseas. Investing offshore is a common red flag of fraud, as it may be impossible to get your money back if something goes wrong. There are no registered individuals or firms permitted to trade binary options in Canada.

Regulators have published a number of warnings about binary options in recent months, including alerting the public to advertisements falsely linking Kevin O’Leary to binary options. As we reported in March, the CSA also launched a task force aimed at protecting Canadians against binary options fraud.

Proposal comment period

The CSA’s proposal to ban advertising or trading in binary options has been posted on CSA members' websites. The comment period is open until May 29, 2017 in Alberta and Quebec, until June 28, 2017 in Manitoba and Saskatchewan, and until July 28, 2017 in all other participating jurisdictions. The British Columbia Securities Commission has not yet published the proposal for comment, although staff anticipates doing so in the near future, says the CSA.

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