The Australian Securities and Investments Commission (ASIC) has just announced its product intervention order banning the issue and distribution of binary options to Australian retail clients.
The ban takes effect on 3rd May 2021.
The Australian watchdog said it found that binary options cause significant financial damage to retail clients in the official announcement.
Reviews in 2017 and 2019 conducted by the regulator show that 80% of retail clients lost money trading binary options. ASIC pointed that that one factor that contributes to clients’ loss is the ‘all or nothing’ payoff structure of binary options where one of the two possible outcomes is that the retail client will lose their entire investment amount. The regulator also attributes the large percentage of losses among retail clients to the short duration of the contracts which on average is less than six minutes and the negative expected returns because the present value of the expected payoff for such a contract is lower than the initial investment.
