The corporate regulator has restricted binary options supply to retail customers after discovering that 80% experienced cash loss according to researches done in 2017 and 2019.

On 1 April, ASIC filed a product intervention to restrict the ‘provision and supply’ of binary options to retail customers after approximating the net losses in 2018 alone from trades was $490 million.

The significant losses triggered a warning from ASIC in April 2019, and the result was a reduction of losses to $6.7 million in 2019. During the 2019 and 2017 studies, ASIC discovered that ‘there was a possibility that binary options would lead to cumulative losses to customers’ due to three traits: the payoff structure (all or nothing), short contract period, and ‘disappointing expected returns.’

The main worry of the regulator was the structure of the binary options featuring all or nothing. Resulting from over-the-counter and the ‘occurrence or nonoccurrence’ that determines the result in a specific period, the offering’s structure places them at opposing sides with the retail investors’ risk structure.

‘The features of the binary options make them unsuitable for risk or investment management utilization by retail customers,’ said Cathie Armour, the ASIC commissioner.

‘The production intervention order from ASIC will safeguard investors from these dangerous items at a period of increased susceptibility. According to the ASIC, the order will be in force for 18 months, and afterward, it might prolong or make the prohibition permanent.

‘Criminal and civil fines apply to breaches of the product intervention order,’ cautioned the regulator.

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