BaFin – Binary options still off limits to retail investors
08 Jul 2019
It remains illegal in Germany to sell binary options to retail clients according to an administrative act of Germany’s Federal Financial Supervisory Authority, the BaFin.
With binary options, it’s either make or break. Yet underlying these “bets” is a complex and opaque financial product. We at GRP Rainer Rechtsanwälte note that it was due to their high-risk nature that the ESMA decided to prohibit the marketing, distribution, and sale of binary options to retail investors in the EU.
While the ESMA’s measure expired on July 1, 2019, the BaFin maintained the prohibition on offering and selling binary options to retail clients in Germany in an administrative act applicable from July 2, 2019.
The BaFin justified its decision with reference to the high risks as well as significant concerns regarding investor protection, particularly with regard to calculating the performance of binary options and the underlying asset, noting that it is difficult for retail investors to accurately assess the risk-return profile. Moreover, since binary option providers act as the direct counterparty, this may give rise to a conflict of interests and manipulation.
Despite the prohibition, there are still criminal providers intent on ripping off retail investors. Lawyers experienced in capital markets law can offer advice.