The ban will be in place until 1 October 2031, the corporate regulator confirmed on Monday — after it first came into effect on 3 May last year — after the corporate watchdog concluded that binary options have resulted in and are likely to result in significant detriment to retail clients.
“ASIC’s extension of the product intervention order ensures binary option protections in Australia remain in line with those in force in comparable markets overseas,” the corporate regulator said.
ASIC’s decision to extend the order was made following a thorough analysis of the impact of the order using data from five licensed binary option issuers and spanning approximately 13 months before and eight months after the order was made.
In the 13 months to 3 May 2021, ASIC found that retail clients incurred significant aggregate net losses trading binary options. For example 74 to 77 per cent of active retail clients lost money trading binary options; retail client accounts made net losses of $14 million in aggregate; loss-making retail client accounts made net losses totalling $15.7 million, while profit-making retail client accounts only made net profits of $1.7 million.
“Binary options are harmful, high-risk financial products resulting in millions of dollars in losses for retail investors before our ban,” said ASIC deputy chair, Karen Chester.
“Extending our binary options ban until 2031 ensures this important protection for retail investors will continue.”
Binary options have an “all or nothing” pay-off structure, where one of the two possible outcomes for a contract is that the retail client will lose their entire investment amount. They also have a short contract duration, with the average period traded with one provider less than six minutes.
The 10-year extension follows approval by Assistant Treasurer and Minister for Financial Services, Stephen Jones, following submission of ASIC’s report and recommendation.
The corporate regulator explained that a shorter extension of the order would require a further process to consider whether it should be extended again and would come at additional cost and effort to ASIC and industry.
