Denmark Bans Binary Options To Retail Clients Permanently
Denmark’s financial regulatory body, DFSA (Danish Financial Supervisory Authority) plans to ban the trade of binary options to retail traders.
As per their claim, binary options are too risky and complex for retail investors. This move should come as no surprise for European traders. Other countries (U.K, Austria) have also taken similar measures against this financial instrument.
DFSA believes more and more investors are losing money on binary options. And the brokers that facilitate binary options trading often resort to breaking rules and regulations.
This isn’t the first time Denmark has taken a stance against binary options. As earlier, in 2016, they identified the dangers of binary options and compared it to gambling.
Denmark Bans Binary Options: Following ESMA's Footsteps?
Another prominent regulatory body to ban binary options is ESMA (European Securities and Markets Authority). Earlier they re-extended the ban from April to June 2019. The ESMA ban restricts the marketing, distribution, and sale of binary options to retail clients.
Keep in mind that the ban imposed by ESMA is a temporary one. DFSA, on the other hand, wants to permanently ban binary options in order to protect the retail investors.
DFSA also believes that the risk posed by binary options will continue to persist unless every national authoritative body permanently bans binary options trading.
These rules are come to effect in the early stages of July. From there on, there will be no marketing, distribution, and sales of binary options to Danish retail traders. This ban covers traders from and in Denmark, and also Danish security dealers and dealers operating in Denmark.
A Controversial Trading Instrument
Binary Options are financial instruments that have two outcomes, hence the name. You predict the price of the asset will be above or below a certain price point after a certain period of time.
You don’t have to pinpoint the exact price, just speculate if it is going to be above or below a certain price level.
If you are accurate in your prediction, you will win a payout. The payout is fixed and is known to the trader beforehand.
Binary Options Brokers offer attractive payouts ranging from 60% to 90%. This means if you invested $100 in trade and predict accurately, you get $180 if your payout is 80%.
Keep in mind that if you get your prediction wrong, you get nothing in return and lose your initial investment.
I get why Binary Options are compared to gambling but I personally believe these two are different things. Gambling involves testing your luck while trading binary options is a different ball game.
Traders analyze the market, carefully choose the asset, and perform fundamental and technical analysis, and then place the trade.
While binary options are getting banned in some countries, other countries are accepting it with open arms. The future of binary options doesn’t has a certain direction but it certainly is gaining more and more traction.