ASIC’s Binary Options Ban Start 3 May 2021 – Plus next steps for previous binary options providers

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Binary Options

ASIC has issued a product intervention Order (Order) which bans the issue and distribution of binary options to retail clients from 3 May 2021. The Order will remain in effect for 18 months, after which it will be extended or made permanent.

The banning Order has been made pursuant to ASIC’s product intervention powers and comes after ASIC sought feedback from industry participants, consumers, consumer groups and other stakeholders via the release of Consultation Paper 322.

ASIC had previously flagged new regulation and intervention within the industry, however the banning of binary options comes as one of the more severe options in ASIC’s power. Reviews conducted by ASIC in 2017 and 2019, and specifically Reports 579 and 626, found that 80% of clients who trade binary options lose money. ASIC Commissioner Cathy Armour noted that:

“A complete ban would prevent retail clients from losing money trading binary options. We believe binary options provide no meaningful investment or economic use, and have product characteristics similar to gambling products.” [1]

For industry participants, the Order requires that where a binary option has been issued to a retail client in the 12 months preceding the Order, they must notify their clients of the terms of the Order.

Next steps

  1. Prepare a communication to be sent to affected clients within 15 business days of the commencement of ASIC’s Order (i.e. 3 May 2021);
  2. Review marketing material and remove all references to the sale or issue of binary options to retail clients. Where you are continuing to offer binary options to clients who qualify as wholesale, you will need to ensure you have the appropriate controls in place to ensure the qualification of these clients as wholesale; and
  3. Review your current systems to ensure they are able to implement an orderly close out of client trades within the required timeframe.

Further reading

If you would like to further discuss how these changes affect your business, please contact us.


About The Author

Alicia Pevely

An integral member of the Sophie Grace team since 2012, Alicia has extensive experience in relation to financial services law, consumer credit law, regulatory matters and ASIC investigations. Working closely with her clients, Alicia has maintained a significant emphasis on AFS and credit licensing and liaising with ASIC. As General Manager, Alicia has oversight of all licence applications and provides advice and support in relation to more complex applications.  

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