Earlier this year, the European Securities and Market Authority (ESMA) decided to update the regulations for binary options and CFD trading within the European Union. Ever since then, everyone in the industry has had mixed feeling about the changes. Some have even raised concerns about the situation saying the new rules could have devastating effects on the market.
What should you be expecting from these changes and how can you retain access to the full list of beloved trading instruments? Read the full article to find the answers.
Changes that were made
Before we get into that, it is important to clarify what actually happened and what changes ESMA is about to enforce.
First, ESMA has decided to ban all forms of binary options trading. That means that no one is allowed to participate in binary options trading within the European Union except for professional traders. The ban will come into effect on July 2.
Secondly, ESMA updated the regulations regarding CFD trading in an attempt to reshape the market. This was done by lowering and limiting the amount of available leverage for every asset class as well as forcing CFD brokers to implement protection against negative account balances. Starting from August 1 the amount of leverage traders will be able to use when trading certain assets is limited in accordance with the following:
- 30:1 for major currency pairs;
- 20:1 for non-major currency pairs, gold and major indices;
- 10:1 for commodities other than gold and non-major equity indices;
- 5:1 for individual equities and other reference values;
- 2:1 for cryptocurrencies.
As you can see, the cryptocurrency market was hit the hardest, while major currency pairs can still enjoy relatively relaxed regulations. It is worth mentioning that CFD positions will need to be closed when the margin falls below a level of 50% of the initial required margin.
Traders will now have to be guaranteed negative balance protection. This feature, however, has long been implemented on the IQ Option platform. The protection against negative balances will mean that no one can lose money they haven’t invested. The list of changes is not limited to the points mentioned above. However, those are the ones that are most likely to affect IQ Option clients.
Possible downsides
There are several issues with new ESMA regulations that a lot of traders may find confusing. Retail traders (everyone with no professional status) will no longer be able to trade any of the binary products and utilize high leverage. Therefore, certain strategies that worked in the past may no longer be applied. Not only traders will have to readjust their trading habits but also find new instruments to trade. The latter will obviously take a lot of time and effort.
As always in the financial markets, higher risk is usually associated with higher reward. By trying to protect European traders and minimize risks associated with trading, ESMA is taking away a considerable portion of their financial freedom.
Conclusion
Is there anything you can do in order to avoid stricter rules? Those of you who want to continue trading binary options have to confirm their professional trader status. Read more on how to do so in the following article.
Apply to become a ProNOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
In accordance with European Securities and Markets Authority’s (ESMA) requirements, binary and digital options trading is only available to clients categorized as professional clients.
GENERAL RISK WARNING
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
73% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
We invest in Bit on as little as 250 dollars is it possible to make millions.
Thank you for this question!
What differs successful trader from others is efficient money management and trading strategy.
I want to state 5 tips of the successful trader:
1. Only trade with money you can afford to lose.
2. Be patient.
3. Be disciplined.
4. Never risk too much capital on one trade.
5. Don’t second-guess yourself, but do learn from experience.
Note that I am not giving you an investment advice.
The financial services provided by this website carry a high level of risk and can result in the loss of all your funds.
If you have other questions – please do not hesitate to contact us!
Hi what news about the Fx option for the European retail trader like me when they gonna release it.. ?
Hello Dunhill Alberto, thank you for this question!
Hight quality of our products is our main priority.
This is why we are still working on FX Options for retail traders, in order to present you a top notch product.
We apologise for the delay, our developers are working on it and we will present new products soon.
Thank you for your support!
Hello, so, if i allready have open\holding positions in the cryptocurrency market they have to be closed when i have 50% loss!!!???
Hello Peter, thank you for this important question!
No need to worry – this rule only applies to Crypto Positions opened after new ESMA regulation takes affect.
So if your position was opened before – it will not be closed at 50% loss.
If you have any other questions left – please let us know!
Wish you a lovely day!
Also Traders out of EU won’t be able trade Binary Options since July 2, unless they are professional trader ?
Good evening,
New regulation of ESMA regarding Binary Option and CFD only applies to traders from European Union.
Professional and retail traders outside of European Union will not be affected by this rules.
As soon as have an update on this matter – we will inform you!
Have a wonderful day!
That is really Bad News…
I live in Eu and Is it possible to register to any Broker outside Eu Zone, and trade BO?
Hello, James!
In order to trade on BO you have to live outside the Eu Zone. Regulated brokers won’t provide BO for European traders starting from 2 of July.
Well, what if I am living in Germany (as a taxed employee, and as a registered tenant but without citizenship) while I have the nationality far-outside EU? This regulation is sophisticated for people like me, like IQ Option is in EU while it would have tons of access abroad.
I have reached this info while I am preparing to start with my own account, so I need to consider some other route if I am under the regulation because of practical-living-location and practical-working-place.
Could you give me some advice? Thanks!
Hi!
Thank you for the describing the situation in details
In this case, you need to provide us with some document from the Government, officially confirming your stay in Germany.
this is stupid
Hi!
We are also not pleased with this new regulation…
Vă salut ; cu respect.Si eu sunt foarte supărat că nu mai pot lucra pe Forex Digital .Cred că era ce-a mai bună formă de a lucra.Multumesc.
Let’s hope that in the future everything will change.
This new ruling by ESMA is severe discrimination against Retail users of Binary Options Platforms. What any person does with their own money is their right and quite frankly this should be looked at by the Human Rights Authorities.
Trading Binary Options intelligently is NOT GAMBLING ! anymore than any other form of investment. The intelligent investor uses discipline and strategies. HOW DARE ESMA make this unilateral decision. I see this as a plan to stop retail customers having a piece of the action and keep it all for the FAT CATS.
I want to see Brokers and Retail investors STAND UP AGAINST ESMA and get this decision Reversed. There are always going to be FOOLS and ADDICTIVE GAMBLERS in any area viz. horse and dog racing, football pools, casinos, lotteries. AS I SEE IT, YOU PAYS YER MONEY AND YOU MAKE YER CHOICE and this is nobody else’s business. I AM BLOODY FURIOUS ! ! peterheale@gmail.com. please publish my email address.
Saint true my friend , its the strategy and risk to reward ratio that have matter on win or loose in general , leverage can only slow down or speed up this process… not prevent this !!!!
People have rights to use or soend money how they like, bunch of liers, all system is corrupted , tell them to target scams etc. Not people who try to make some money in peace .
Vă salut ; cu respect.Da aveti mare dreptate; e o discriminare plus garanții asupra banului și protecție a clientului ; exista multe semne de întrebare.Aceste Platforme au promis multe lucruri bune ; mă întreb ; unde sunt aceste promisiuni .?
Hello, dear Friend!
Yes, I understand you! Lately, we have been receiving a large volume of complaints concerning traders being scammed by other brokers.
That’s why it is very important to choose a reliable broker from the very beginning.
Please, be wise and don’t let others take advantage of you!
I am totally agree with you! I have the same feeling with ESMA., and indeed, my money, my choice, my right how to use it.
Hello, Peter!
Thank you so much for such a detailed review!
We hope that there will be an update on this situation, that will benefit ESMA, brokers and traders all together.
Wish you all the best of luck!
I am ready to sign the petition, as well as other hundreds of thousands of small traders who earn a hundred bucks and are quite happy with it. Unfortunately, I can not draft such a petition, as I do not speak English enough. Create such a petition in Change.org. Many EU traders will sign it. I’m sure. No one can decide for me where I want to spend my money.
Sărut măna ; cu respect ; aveti mare dreptate Și sunt de acord cu această ideile.Si eu mă întreb ; de ce noi din UE nu mai avem dreptul și cei din afara UE au dreptul.Discriminare pe față.Multumesc.
You are SO right Peter, this are my feeling too
This is just another decision by the financial elites to prevent the peasants from having a bit of the action themselves. No one punishes these fat cat punks when they steal billions and get bailed out by govts to the tune of trillions or get bonuses of multi millions after crashing the economies of western countries and the rest of the world through fractional reserve banking and engineering the financial crisis of 2007 and 2008 crashing the entire economies of western countries during that period. Where are the restrictions on them! Also it is a directive from the EU. Which is another reason why the EU should be thrown into the trash bin. Another means of centralised control and for the Elites to hoard all the gold. Just like in the old times of Peasants and Kings. A disgraceful restriction on freedom by the corrupt EU!
retail trades just lose freedom of investing money!
Hi! Is digital option trading still going to be available for retail traders?
Hello Nikita,
Digital Options will also be banned in European Union, starting from the 2nd of July.
Thank you for your comment.
Hi,
after 2nd July is it possible for the retail traders from EU to trade any of the tools: Options, Forex, CFD, Crypto, Commodities?
As I understand Options and CFD is not possible. But other?
Thanks for the answer!
Hello Alenka, thank you for your comment!
After the 2nd July retail customers from EU will have access to the following assets:
– Crypto
– CFD
– Forex
– Commodities
Here is information regarding leverage limits for those assets:
– 30:1 for major currency pairs;
– 20:1 for non-major currency pairs, gold and major indices;
– 10:1 for commodities other than gold and non-major equity indices;
– 5:1 for individual equities and other reference values;
– 2:1 for cryptocurrencies
I hope it is more clear now? If you have any other questions left – please let us know.
I will be happy to clear all of your doubts!
Hi Alenka!
I’m from SLO! Please, tell me are you come from SLO too?
Best regards, Igor!
Hi there!
That’s right! I totally agree with you both … the decision from ESMA is a purely discriminatory or even criminal act against ordinary people who have the right to decide on their financial investments themselves! I’m really afraid that after July 2th 2018, ESMA officially opens the door to the expansion of many new fraudulent ” Internet brokerage sites”! And what then? 200 fat asses (ESMA’s employees) in Paris will return money to millions of defrauded retail investors? Of couse not! A big question arises if ESMA’s decision is in line with certain principles of the European Constitution, which guarantees equality, freedom and the right to prosperity for Union citizens. My opinion is…such literally “repressive” measures must be compatible with the European Constitution! I’M NOT A LAWYER! SO, WHAT TO DO?
From EU-Constitution:
II-103. Article (European Ombudsman)…Every citizen of the Union and any natural or legal person residing or having its registered office in one of the Member States has the right to contact the European Ombudsman regarding irregularities in the activities of Union institutions, bodies, offices and agencies, with the exception of the Court of Justice of the European Union in the performance of his judicial functions.
II-104. Article (Right to petition)…Any citizen of the Union and any natural or legal person residing or having its registered office in one of the Member State has the right to petition to the European Parliament.
It is dicriminatory, but consider this,
You have 20 leverage (on EUR/USD -major pair), but let´s just say GBP/JPY for this case, (30 leverage).
Point comes here – since you have 50% stop out on per account basis (but on IQ Option is on position basis) – your stop loss, if it´s 100, would have to be double, to 200 pips (points, or anything for that matter)
–> So, you really have just 10 leverage on major pairs, and 15 on minors.
+ to the fact that brokers can see your stop losses, the average trader would get stopped out 50% sooner than his stop loss is, assuming he wants to make any significant profit his account, besides buy and holding a stock for 2+ years.
Just goes to show, that these people, who are at E S M A, have no clue what they are doing.
Normal situation as is pre-ESMA, is, that you simply would open position on IQ Option, input your selected ammount, and agree to the opening, AGREE to 500 leverage opened with – (and besides, this just means you are just risking WAY WAY less of your money – for example to open 1 lot from 10,000€ (or any amount)- would take just 200€ x 500 = 100,000 = 1 lot.
Under esma, one lot on EUR/USD, would require 5000€ (!).
Which is half of your starting balance of 10,000€.
Not to mention, that even if you open this position, you would have to have, really in fact, at some cases, 10 leverage in fact.
(Because of the fact, that your stop loss would have to be double the size) – because of another great “idea” of ESMA, of 50% stop out.
Doesn´t really matter if it´s on account on position basis.
It´s rather advanced stuff, but nonetheless applies.
But by the way – in the US, buy and or holding the same asset, even under a different broker, is a felony on the federal level.
Luckily, each member state of EU, can choose whether to comply with this trash that ESMA proposes.
Or not.
They probably will all accept, and brokers won´t give you the 500 lever.
Granted, 30 is the perfect size, but also on majors, not minors.
Really, the 500 leverage is AN OPTION, not a sign of pressuring from the broker for you to use it.
Nobody forces you to use 500 leverage, but ESMA considers it´s citizens (or from France? – it probably has no idea people outside France exists – since in France, Binary options already were seeked to be banned, not on EU level).
In other words – what does ESMA really think?
It considers people that don´t have 500,000€ (which for the people that work there is peanuts, but for people in the real world, is a sum that takes decades to save) —-> LOSS PRONE, Uneducated, and in the interest to be protected / d*m*.
The fact is, ASIC, in Australia, has much much heftier regulations for the brokers, than ESMA, minus the leverage, of course, but nobody forces you to throw your money into rubish bin, or use 500 leverage.
It´s an option, not a show of force, or anything of that nature from the broker. You are free to choose whatever you need, but people with over 500,000€, certainly do NOT use leverage of anything over 30 over the long term, but this really shows in the statistics as 30 leverage.
What really is happening – they have 500 leverage enabled, but only to be able to open multiple positions / not risk half of their account to open a simple 1 lot position.
Since floating margin (on other brokers than IQ Option obviously), is not a realized loss, until the position is closed, and besides, if you need to capture a movement in the price of dollar strenghtening during the day, you would have to, really risk your entire account balance – and trade only one position.
Yes, this is really great for the statitics – makes the most money, but only for the people that have huge sums to invest already – such as 500,000€, why don´t they lower it to these people with over 500,000€ to 20-30x, hm?
Besides, these people are never actually using 500 leverage if you are so crazy to think so, ESMA.
All I see is some person from Monaco, that discovers IQ Option, becomes a professional trader, and uses 500 leverage to lose all his money, because of ESMA.
Wasn´t it also France that wanted 90% tax to the high income individuals?
I am not pointing anything out, but any insane regulations always seem to come out of France.
Rest of EU member states – I don´t see any single one that the regulatory agency of the any country whatsoever will decide not to comply with these proposals of ESMA.
But on the other hand – if you are some 80+ years person, loss-prone, uneducated in ESMAs eyes, don´t worry, because aunt ESMA has your back, and will make sure you won´t lose any money out of your account like you should.
And can complete your mission in life, whatever it is, such as increasing, your profits, should we say.
Point is – people with under 500,000€, need 500 leverage, and vice-versa (nobody over 500,000€ – not mentioning hedge funds, and similar), needs over 30 leverage, minus 50% close out on account / or even position basis, which is an utter nonsense.
Professional clients speaking – an average person with 500,000€ +, does NEVER use 500 leverage, – and I am saying putting his account on the line with 500 leverage.
Rather he is using 500 leverage to be able to simply risk LESS of his OWN account balance. Saying, if someone has 10,000€, he does not need to risk 5000€ to open 1 lot, only to get stopped out at another 50%.
Because to open 1 lot, 200€ is enough with 500 leverage. In other words, this regulation helps no one, but helps uneducated people, who should lose money, keep it, under ESMAs guard.
Good job ESMA.
And since brokers / market makers can see your stop losses, it is actually good idea for the banks to enjoy / have some other free money.
Deutsche bank is supposed to know about 50% Forex transactions in the market.
Add to it the fact, that you have 50% close out, and a huge motivation to make retail clients lose further more.
(Since you are able to see their stop losses).
Not a lot of money, but any money is good, isn´t it?
*in the US, buying and selling the same currency pair, even under a different broker, is a felony on the federal level.
Hedging to be clear.
Population control at it´s finest.
Nobody agreed to these crazy measures, 98% traders said no, yet ESMA proceeds. Just shows what the people at ESMA are doing whatever they want instead of listening to the people.
“I’M NOT A LAWYER! SO, WHAT TO DO?”
You can´t do anything. Even in the US, they have leverage capped at 50.
In other words, what you CAN really do, is contact your local regulatory agency, to recommend Them to not accept this proposal on the state level (Poland is notorious in the FX world for having it capped at 100), but besides, it´s doubtful if any state has the “courage” to stick out, and refuse these measures.
Somebody said here before from the IQ Option staff, that the FCA regulations are stricter which is not true, because they are actually the same just pointing to some hyper confusing syte on their link, giving a bunch of jargon and confusing paragraphs.
By the way, I´m also from SLO, perhaps you should notify the Local Governing Bank to not accept this measure 🙂
I don´t know if it´s true, but I have heard, that any individual member state of the EEA can refuse to accept this, but who knows what the reality is.
https://www.quora.com/Why-does-the-U-S-ban-hedging-in-the-forex-market
“Hedging was banned in 2009 by CFTC chairman Gary Gensler along with the FIFO rule and leverage was reduced to 50:1 for US Forex brokers. To my knowledge, the stated purpose of these rules was to “protect” new traders from blowing up their accounts. As with many government regulations, the effect was negligible and had the unintended(?) consequence of driving much of the business offshore and some FX brokers went out of business.
Anyone who states that hedging is pointless, just doesn’t understand how or why to use this tool. I don’t hedge frequently, but there are situations where I’ll hedge a large position and buy time to evaluate if it should be held, reduced or closed. While a drawdown on a position is offset with a hedge, it allows me to think clearly about my strategy and make better decisions.”
Hedging in the US really works by opening oposite position on similar pair / or eg. buying gold when betting the US dollar would go up / buying DXY when selling EUR/USD, etc…
*selling Dollar index when selling EUR / USD.
Nonetheless, you get the point.
The law saying, that you can’t trade risky instruments, if you don’t have 500k or expierience, realy is the same as saying, you can’t open a buisness, if you are poor. Opening a buisness is far more risky than binary options or high leverage. That is the equivalent of only letting the aristocrats partake in commerce.
Hello, thank you for your comment.
In our opinion ESMA regulation aims to secure financial markets, especially when it comes to such a risky instruments as Binary Options.
It is our responsibility, as a broker, to keep our activity transparent and follow regulation.
Nevertheless we are working on new trading instruments, that we will announce in the nearest future.
Stay tuned!
So in which countries will Binary Options be legal after 02nd July? Does anyone have a list? How can we find out?
Hello Jen, I hope you are doing great!
Binary Option will be banned only in European Union.
All the countries outside of European Union will have access to Binary Options.
In case you have other questions – please let us know.
Best regards,
IQ Option Team
What about Switzerland? It is not part of the EU still belongs to Europe… Banned or not banned? Thanks
Hello, Daniel!
The Binary Options instrument is going to be available for our traders from Switzerland. You don’t have to worry 🙂
Hope you are having a great evening!
Но чем же мы,граждане из Европейского Союза,так провинились,что нас лишили бинарных опционов?
Добрый день, Людмила!
Хотелось бы заметить, что Вашей вины в этом конечно нет!
Бинарные опционы были запрещены в связи с новой регуляцией ESMA.
На наш взгляд, это произошло из-за большого количества брокеров мошенников, которые создали негативный облик этого торгового инструмента.
Мы, IQ Option, как регулируемый брокер, должны следовать этой регуляции.
Мы будем рады помочь Вам, если у Вас есть другие вопросы. А также мы готовим к запуску новые торговые инструменты!
Оставайтесь с нами 🙂 И удачи в торговле!
i do business internationally and i spend considerable time in China. Can I change my address and reverify my account?
Hello, Alain!
Thank you for the question!
Let us tell you that each case is unique and requires consideration from our side. There are might be restrictions in some cases.
Please kindly contact our support by hotline, email or live chat in your trade room (https://iqoption.com/en/contacts) and we will take a look at your particular case and guide you through.
Thank you!
Hey !
I got a question for you.
I’ve just sign up for this site from greece and i am not a verifed user yet,i’ll do that later in future if BO comes to EU again !
I can see the BO is banned now but what if somehow i travel to any other country where BO trading is not banned like(Asia) ,will i be able to do BO trade on my account in this case ?
Hello Zain, thank you for your comment!
Let me first inform you that verification procedure should be completed within 7 days after your first deposit on IQ Option.
As for your second question – BO are banned for European Union citizens, therefore you will not have access to BO if you travel to Asia.
We are working on new trading instruments that we will announce really soon, stay tuned!
Best regards,
IQ Option Team
Will UK citizens be able to use binary options again after we leave the EU 26 March 2019?
Hello, Gary!
It’s a good question! For now, we are not planning to do any changes but time will tell. Please, stay tuned.
Best of luck!