ASIC update: proposal to extend ban on binary options

ASIC is seeking to extend the binary options product intervention order from its current expiry date of 7 October 2022 to 1 October 2031.

As reported in our earlier paper ‘ASIC product intervention orders: ban on binary options for retail clients and restrictions on retail trading of CFDs’, last year ASIC implemented a product intervention order banning the issue and distribution of binary options to retail clients (Binary Options Order) which is currently due to sunset on 7 October 2022.

ASIC has now announced that it is proposing to extend the ban until 1 October 2031, unless revoked or further extended, and has published a consultation paper (CP 362) seeking feedback on its proposal.1

ASIC’s quantitative analysis suggested that the existing Binary Options Order has been effective in reducing the risk of significant detriment to retail clients. They found that in the 13 months prior to the Binary Options Order taking effect, retail clients made net losses totalling $14 million. Since the Binary Options Order was implemented, there have been no losses for any retail client from trading binary options (which follows from there having been no binary options trading by retail clients). By contrast, 68% of wholesale clients have incurred a loss from trading binary options since the Binary Options Order was made.

ASIC does not consider that alternative policy options, such as requiring the disclosure of risk warnings or restrictions on inducements, would be effective in reducing the risks associated with trading binary options.

The consultation process on CP 362 has closed, with ASIC expected to seek Ministerial approval for, and make a decision on, the extension by October 2022. There is every indication that the extension will proceed.

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1 ASIC Media Release ‘22-118MR ASIC proposes extending its binary options product intervention order’, 26 May 2022.

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