The Netherlands Sets A Ban On CFDs And Binary Advertising

The crackdown on toxic financial products continues in Europe with Netherlands joining the fray with the ban on advertising of binary options and contracts for differences (CFDs).

However, fears linger that hurried regulations to battle fraudulent binary options providers could spoil the market for genuine electronic trading providers.

The Netherlands’ ban on advertising of toxic investment products such as binary options could lay the foundation for a total banning of such investment activities in the country. France and Belgium have already placed banned all retail trading of leveraged derivatives, thus affecting binary options, CFDs and FX.

Protecting Dutch consumers

The new rules that Dutch financial services regulator, the Authority for the Financial Markets (AFM), has come up with will specifically bar foreign companies offering CFDs and binary options trading from targeting Dutch consumers with their advertisements.

AFM has established that Dutch consumers are losing large sums of money because of misleading advertisements by offshore binary options trading providers. As such, the decision to ban advertising of such toxic investment instruments is designed to protect the Dutch consumer and it could lead to a complete ban on binary options and CFD trading.

The offshore binary options companies are accused of enticing Dutch investors with the promise of quick gains, but what actually happens is that the investors get entangled in the web of frustration. If they are not being cheated out of their money outright with gambling activities that have been packaged as an investment, they are unable to withdraw from their accounts.

Though there are channels that consumers can lodge complaints against binary options firms in Cyprus if they feel cheated, authorities in Netherlands say they know not of anyone who has found help pursuing their money.

Europe quickly becoming a no-go zone for binary companies

Europe has stepped up its efforts to rid the region of fraudulent companies purporting to offer lucrative short-term investments. In August, Belgium announced a total ban on all retail trading in binary options, CDFs and FX. Though only advertising of binary options and other risky investment products has been affected in the Netherlands, the country is on the path of joining its Europe peers with a total ban on such investment activities.

The Netherlands’ AFM is looking for the implementation of MIFID II, which it says will give it more room to fight toxic investment products. The coming to ban advertising of binary options follows a stream of complaints against binary options providers that AFM said it received last year.

Germany is also on the verge of banning all kinds of binary options and other potentially toxic investment products in the country as part of consumer protection measures.

Denmark can also be seen starting to read from the same script as its European peers. Though the country has not uttered a ban on binary options, it has warned its citizens against engaging in such trades, citing many examples of consumers in Europe who have lost through binary options trades offered online.

Ban on toxic financial products

The ban on so-called toxic financial products is a global trend. Binary options providers are facing a ban from Israel to the U.S. to Canada. Though different countries are using different approaches to a protect their consumers against highly leveraged derivative investments, the net result is that binary options and CFD firms are facing a future without clients.

The crackdown on binary options has heightened as international media continues to expose the rot in the industry and the risks it poses to the global financial system. However, a blanket ban on retail trading in leveraged derivative like in the case of Belgium can be seen producing collateral damage as genuine electronic trading firms are also being affected.