Spread Betting Firms See Stocks Tumble in Wake of EU Crackdown

A number of spread betting firms share prices fell sharply in recent days on news that the European financial regulator will begin cracking down on binary options and contracts for difference.

The Paris-based European Securities and Markets Authority (ESMA) said on Friday it was considering a ban on the marketing, distribution or sale to retail clients of binary options as well as imposing leverage restrictions and a guaranteed limit on client losses.

Plus500’s share price fell by 17% on Monday while CMC shares plummeted 14% and IG Group fells just over 12%.

In a statement the regulator said: “ESMA remains concerned that the risks to investor protection are not sufficiently controlled or reduced.”

The regulation of binary trading will switch from the Gambling Commission to the Financial Conduct Authority (FCA) effective January 2018.

A handful of countries, including Israel and Belgium, have banned binary options trading.  

Earlier this year, the binary trading market suffered a black eye following the abrupt closure of Banc De Binary and other firms

“It’s become the wild west in the past few months,” a company official told Finance Magnates. “Its just not worth the tarnished reputation. I don’t see how we can continue operating under such scrutiny and public image.”

A former US secret agent also revealed how he helped get back $2 million late last year for customers bilked by one binary firm.

In September 2016 it was revealed that two binary options businesses based out of Israel specifically targeted the vulnerable, telling staff to “rape clients out of their cash”. The binary options involved were AA Option and Inside Option.

- Aaron Goldstein, Gambling911.com