The Central Bank has announced that it will ban the sale of binary options to retail investors and restrict the sale of contracts for difference (CFDs) to retail investors. This will be the first time that the Central Bank uses its product intervention powers introduced in 2018, which allow it to prohibit or restrict the sale of certain products. These interventions reflect the Central Banks’s significant concerns relating to the sale of CFDs and binary options to retail investors and will take effect immediately after the European Securities and Markets Authority (ESMA) intervention measures lapse.

The binary options measure will prohibit the marketing, distribution or sale of binary options to retail investors. The CFD measure will restrict the marketing, distribution or sale of CFDs to retail investors. This restriction consists of limits on leverage, a margin close requirement, a requirement that retail investors cannot lose more money than they put into their CFD account, a prohibition on the use of incentives by a CFD provider and a standardised risk warning.

On 27 March 2018, the Central Bank issued a warning to investors on CFDs and binary options. EU competent authorities had undertaken reviews over previous years, which revealed that between 74% and 87% of retail clients incurred losses when investing in binary options. On CFDs, a Central Bank inspection published in 2015 found that 75% of retail CFD clients made a loss, of which the average loss was €6,900. 

The Central Bank has worked closely with ESMA on this investor protection issue. In 2018 ESMA imposed temporary product intervention measures in relation to the sale of CFDs and binary options to retail investors, measures for which the Central Bank had advocated. Once these temporary measures expire, the Central Bank’s national product intervention measures will immediately take effect in order to ensure ongoing protection of retail investors.