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UK regulator to adopt European binary trade and CFD curbs

The FCA added it would consult in early 2019 on a potential ban on cryptocurrency CFDs
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Binary-option trades face a permanent ban after the UK regulator confirmed it would adopt recently introduced European rules.

In August, Europe’s regulator, ESMA, brought in a temporary ban on these binary 'win or lose' trades alongside controls on margin trading.

Britain’s financial regulator, the Financial Conduct Authority, said today it intended to follow those rules and extend the products covered to include turbo-certificates – a leveraged form of betting on market fluctuations. ESMA’s rules limited the leverage available on CFDs, capped potential losses and curbed marketing to unsophisticated customers. The FCA added it would consult in early 2019 on a potential ban on cryptocurrency CFDs.

A permanent ban on binary options would save retail investors up to £17mln per year, the FCA added, while the curbs on CFDs might reduce their losses by £267mln.

“The FCA is acting to tackle widespread concerns about the inherent risks of these products, and the poor conduct of the firms selling them, that has led to harm to consumers in the UK and internationally through large and unexpected trading losses,” said the statement.

Broker Liberum welcomed the decision and said it was a positive for the sector that the measures are permanent.

“We anticipate this will happen across European national regulators, so reducing the perception of regulatory risk for the sector.”

The group has a buy rating on CFD broker PLUS 500 PLC (LON:PLUS) and a target price of 2,800p.

Shares rose 2% to 1,440p.

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