Binary options face ban with CSA ruling

Canadian securities regulators have banned short-term binary options, in which investors bet on whether the value of an asset will increase or decrease in timeframes as short as hours or even minutes.

The implementation of Multilateral Instrument 91-102 Prohibition of Binary Options makes it illegal to advertise, offer, sell or otherwise trade binary options shorter than 30 days with any individual.

The Canadian Securities Administrators said the ban supports its efforts, which include working with credit-card companies, tech companies and advertisers that binary options fraudsters rely on to carry out their schemes.

Binary options take the form of a wager in which investors bet on the performance of an underlying asset, often a currency, commodity, stock index or share — after which they either receive a predetermined payout or lose the entire amount.

But in many instances no actual trading occurs and the transaction takes place for the sole purpose of stealing money. In addition, those who have provided credit or personal information to binary options sites frequently fall victim to identity theft.

The firms and individuals involved in the operation of binary options trading platforms are often located overseas.

“Binary options are the leading type of investment fraud facing Canadians today, and the impact of this kind of scam on individuals is staggering,” said Louis Morisset, chair of the CSA and CEO of Quebec’s Autorite des marches financiers.