Consultation Document on the Proposed National Intervention Measures regarding to Binary Options

Binary options are cash settled derivative contracts based on the direction which the price of an underlying asset will take within a specified time frame and having only two possible outcomes that depend on whether the forecast price is correct (in-the-money) or incorrect (out-of-the-money). Thus, binary options are considered as financial instruments in terms of the Second Schedule of the Investment Services Act (Cap. 370 of the laws of Malta).

Binary options are considered as complex financial instrument because of their speculative nature and the difficulty of the option value evaluation. In this regard, the European Securities and Markets Authority (“ESMA”) prohibited the marketing, distribution and sale of binary options to retail investors by the Decision EU 2019/509, which remains in force until the 1st July 2019.

In the light of this ESMA initiation, the Malta Financial Services Authority (“MFSA”) is proposing to adopt a National Product Intervention Measures with respect to binary options. This proposed measure would essentially mirror ESMA’s intervention measures and would be applicable to investment firms which provide services related to binary options in/from Malta or through a cross-border basis.

Please feel free to contact us in order to obtain more information about the regulatory requirements of binary options and the proposed National Product Intervention Measures of MFSA.