Is Binary Options Trading Legal in Germany? (BaFin Status)

BaFin issued a general administrative act under Article 42 MiFIR prohibiting the marketing, distribution and sale of binary options to retail clients, in effect from 2 July 2019 following the expiry of ESMA's temporary measure. The order states no end date and specifies three exception conditions.

What the Rules Say

BaFin issued a general administrative act under Article 42 MiFIR prohibiting the marketing, distribution and sale of binary options to retail clients, following the expiry of ESMA's temporary measure on 1 July 2019.

In effect from 2 July 2019.

BaFin's order says the prohibition takes effect when the effect of ESMA Decision (EU) 2018/795, as amended by Decisions (EU) 2018/1466, 2018/2064 and 2019/509, ends.

The order states no end date.

BaFin stated reasons for the prohibition: binary options are complex and lack transparency, especially with regard to the calculation of their performance and the underlying; it is the provider who determines the price, and clients are not in a position to understand it or check its accuracy; as binary options typically are extremely short-term instruments, it is difficult for retail investors to accurately assess the risk-return profile; binary option providers usually act as the direct counterparty to their clients' trades.

Scope and Exceptions

Exception in the order: a binary option is excluded if it meets all three conditions:

1. The term from issue to maturity is at least 90 calendar days.
2. A prospectus created and approved under the German securities prospectus law, a comparable legal regulation of another EU member state, or Regulation (EU) 2017/1129, is published.
3. The binary option exposes the provider to no market risk during its term, and neither the provider nor a company of its group makes a profit or loss on it other than previously disclosed commissions, transaction fees or other related fees.

How to Check a Firm

BaFin's company search covers companies holding BaFin authorisation or notified under EEA procedures.

If a firm does not appear on the relevant register, treat that as a reason to stop and check further before sending money.

Frequently Asked Questions

What measure did BaFin issue on binary options?

BaFin issued a general administrative act under Article 42 MiFIR prohibiting the marketing, distribution and sale of binary options to retail clients, taking effect from 2 July 2019.

Does the BaFin order specify an end date?

The order states no end date.

What reasons did BaFin state for the prohibition?

BaFin stated reasons for the prohibition: binary options are complex and lack transparency, especially with regard to the calculation of their performance and the underlying; it is the provider who determines the price, and clients are not in a position to understand it or check its accuracy; as binary options typically are extremely short-term instruments, it is difficult for retail investors to accurately assess the risk-return profile; binary option providers usually act as the direct counterparty to their clients' trades.

What exceptions exist under the BaFin order?

A binary option is excluded if it meets all three conditions: a maturity of at least 90 calendar days; a published prospectus approved under German securities prospectus law, comparable EU member state law, or Regulation (EU) 2017/1129; and the provider bears no market risk, with neither the provider nor its group making a profit or loss beyond disclosed fees.

Does this page address individual liability?

This page summarises what the regulators' published rules say. It does not address whether an individual could face liability. Seek independent legal advice.

Sources and Official References

• BaFin General Administrative Act (1 Jul 2019): https://www.bafin.de/SharedDocs/Veroeffentlichungen/DE/Aufsichtsrecht/Verfuegung/vf_190701_allgvfg_Binaere_Optionen.html
• BaFin Press Release on Binary Options Prohibition (1 Jul 2019): https://www.bafin.de/SharedDocs/Veroeffentlichungen/EN/Pressemitteilung/2019/pm_190601_Verbot_binaere_Optionen_en.html
• BaFin Company Search Database: https://www.bafin.de/EN/die-bafin/publikationen-daten/datenbanken-uebersichten/unternehmenssuche/unternehmenssuche_en.html

This page summarises what the regulators' published rules say. It does not address whether an individual could face liability. Seek independent legal advice.