The Australian Securities and Investments Commission (ASIC) has announced an official ban on binary options for retail investors. This ban means that only professional investors or those with significant trading experience can access these financial instruments in Australia.
Reasons behind the ban
ASIC’s decision aligns with similar measures in other countries and follows an in-depth study revealing significant financial losses among Australian investors trading binary options. The research indicated that nearly a quarter of investors did not recoup any of their investments. Moreover, some investors ended up paying more in fees than they earned from trades, exacerbating their losses. The overall risk was deemed too high for most retail investors due to inadequate protections.
Reactions to the ban
Experts outside the industry have lauded the ban as a consumer victory, while some insiders worry it might drive the market underground or to unregulated areas where control is limited.
Key points
- Ban announcement: ASIC has banned binary options.
- Statement from ASIC: commissioner john price stated, “it is too easy for people to lose large sums of money through this type of trading,” citing risks such as fraud, market manipulation, and other criminal activities.
- Deadline for compliance: binary options providers must cease operations in Australia by march 21st or face fines up to $220 million.
- Investor protections: providers may be required to repay funds taken from Australians since October 2016.
- Assistance for investors: investors who lost money due to fraudulent schemes can contact ASIC at 1800 065 943 for help recovering their losses.
Understanding binary options
Binary option trading involves predicting whether the value of an asset (e.g., shares) will rise or fall by a predetermined amount. These options can be traded on various markets, including currencies, commodities, and stocks. Investors choose their investment amount and contract duration, ranging from 30 seconds to 12 months, and predict if the asset’s price will hit a specified level before the contract expires.
Risks of binary options
Binary options are risky because they offer substantial risks for small rewards. If an investor’s prediction is correct, they receive a fixed profit known upfront. However, incorrect predictions result in total loss of the investment. The high frequency of losing trades compared to winning ones can lead to significant financial losses.
ASIC’s rationale for the ban
ASIC aims to protect investors from the dangers of binary options trading, especially from unscrupulous brokers. The ban prohibits any company from offering or advertising binary option contracts in Australia, regardless of the company’s location. However, the ban does not extend to overseas markets like Nasdaq or NYSE ARCA.
Legal implications
The ban restricts brokers from soliciting potential investors via email, telephone, or social media, thereby protecting Australian traders from predatory business practices.
Recovering your investments
If you’ve invested in or lost money through binary options, you can take steps to recover your funds. Binary options are unregulated in Australia, so local authorities cannot provide protection against fraud. To find trustworthy companies, consult reputable sources like ASIC’s website.
Additionally, consider contacting a professional recovery company like Refundaroo, which specializes in investor recovery and support services for victims of investment fraud. With over 20 years of experience, Refundaroo can help you recover your lost investments.
Don’t delay in seeking help to recover your money. Reach out to Refundaroo today for your free consultation.
