Financial Conduct Authority  

FCA to take over ban of binary options

FCA to take over ban of binary options

The EU rules which currently ban the sale, marketing and distribution of binary options to retail consumers will become part of domestic law on the day the UK leaves the European Union, the Financial Conduct Authority has announced.

The measures which also restrict the sale, marketing and distribution of contracts for difference (CFDs) to retail clients will also form part of UK law if EU law ceases to apply on March 29, 2019.

The product restrictions are currently implemented on a temporary basis by the European Securities and Markets Authority (Esma), but the regulator began consulting in December on whether the measures should become permanent in the UK.

The FCA has since concluded the inherent risks of these products, and the poor conduct of some of the firms selling them, had led to harm to consumers through large and unexpected trading losses.

In a statement published on Friday (February 22) the FCA advised firms are required to comply with Esma's decision notices until they expire on April 1, 2019 for binary options, and April 30, 2019 for CFDs.

The regulator’s consultation on the matter closed earlier this month and it expects to publish a policy statement and handbook rules in March, for binary options, and April for CFDs.

The FCA said if it is unable to finalise its domestic approach prior to Esma's existing interventions ceasing to have effect in the UK, it will consider adopting temporary product intervention measures to replicate the rules.

The city-watchdog said it continues to prepare for a range of scenarios for the UK’s departure from the EU, including in the event of a no-deal.

Earlier this month the regulator agreed a memoranda of understanding with the Esma and EU regulators, which support cross-border supervision of firms and will allow the FCA to share information with its EU counterparts. 

The Treasury has put forward draft legislation that would grant the regulator transitional powers if the UK leaves the EU without a withdrawal agreement.

It has pledged to implement its temporary transitional powers "broadly" in the event of a no-deal Brexit, to minimise the regulatory disruption caused to financial services firms.

rachel.addison@ft.com