Austria Issues New Binary Options and CFD Regulations

Monday, May 27th, 2019 | Written by April Bergman
Austria Issues New Binary Options and CFD Regulations

Austria’s Financial Markets Authority (Finanzmarktaufsicht or FMA) passed a bill to allow “intervention measures” against binary options and contracts-for-differences (CFDs). Austria considers binary options trading to be a form of gambling. While binary options seems to be like day trading or stock market speculation, the 10% fees on options trading sets a high bar for those seeking profits.

The European Securities and Markets Authority (ESMA) tightened regulations in recent months, which has made things a lot more difficult for binary options traders in Europe. Many EU officials applaud ESMA’s actions, with one official calling the binary options regulations proportional and appropriate.

The FMA issued a permanent prohibition on marketing, distribution, or selling binary options to retail clients in or from Austria. People cannot buy or sell binary options inside Austria.

The Financial Markets Authority’s policies are quite similar as ESMA’s measures. Both treat binary options as wagers, so their efforts focus on limiting the damage when options traders face bad luck.

The changes are expected to be made permanent and will go into effect on May 30, 2019. The CFDs measures consist of a permanent restriction placed on the marketing, distribution or sale of CFDs to retail clients in or from Austria.

FMA’s Latest Binary Options Changes

The new measures include a ban on binary options and leverage caps on CFDs as well as foreign exchange (FX) trading. The leverage caps limit the possibility of loss for investors, much like the FOBT bet limits lowered the hourly losses for UK gamblers.

Some differences exist. Those include minor amendments to several of the risk warnings in ESMA’s measures, as well as it includes a legal definition of virtual currencies. The new measures do not expressly prohibit participating in circumvention activities.

ESMA’s Stance on National Edicts

ESMA made a statement on the FMA’s new policies. The European watchdog said it would issue a positive opinion on the product intervention measures adopted by national authorities.

ESMA stated, “If ESMA concludes that a proposed national product intervention measure is not justified or proportionate, it will say in its opinion. If an NCA proposes to take, or takes, action contrary to an opinion adopted by ESMA, the NCA shall immediately publish on its website a notice fully explaining its reasons for so doing.”

In essence, ESMA is leaving national regulation to national agencies. If a dispute exists, the national regulator must do is publish a text explaining why it decided to introduce measures that go against and are not supported by ESMA.

Simply put, ESMA does not hold a lot of power when it comes to decisions regarding product intervention measures at a national level. Nations that want to support their online trading industries can opt against the restrictions placed by ESMA.

CFDs and Turbo Contracts

As ESMA made its startling admission, several countries decided to make it permanent. FMA is not Europe’s only financial regulator to adopt ESMA’s product intervention measures. Several other EU regulators have already started the process towards making these measures permanent including Germany, France, and the Netherlands.

The Federal Financial Supervisory Authority (BaFin), Germany’s regulatory body made a formal announcement of a decision to make ESMA’s measures permanent. England’s Financial Conduct Authority (FCA) also decided to adopt the measures put in place by ESMA, with plans to introduce them by the close of this summer.

FCA hinted that their measures will be similar to those by ESMA, though a few minor adjustments to the ESMA plan can be expected. The main difference involves CFDs and similar products, including turbo contracts, will be included entirely in the regulations once it is released.