So, the Netherlands government recently decided to join other European countries like France and Belgium to impose a ban on trading in binary options. Question is what does this ban mean for Dutch investors?
For starters, let’s demystify binary options. According to Wikipedia, a binary option is essentially a financial option in which the payoff is either some fixed monetary amount or nothing at all. It’s considered by some as an exciting form of investment because an investor gets to know up front what they stand to gain or lose, whichever direction their investment goes. For other’s however, this is considered as a form of gambling because binary options promise huge payouts to investors, and in most cases, they seldom bear fruit.
Let’s look at a few implications of the binary options ban for Dutch investors.
Reduction in investing in risky ventures
There are a significant number of investors who believe that the higher the risk, the higher the reward. However, all throughout history, investors have lost big when they have put their money on many of these high risk ventures that are mostly unregulated. Binary options are a perfect example. Because most of the platforms that provide trading in binary options are online, it’s virtually impossible to regulate this industry therefore making it difficult for national financial regulators to protect local investors. The move by Dutch financial regulators to impose a ban on binary options will go a long way in reducing the practice of investing in risky ventures by Dutch investors.
The ban will put a serious dent on the industry
It’s estimated that the daily volume of trading in forex and binary options globally is about $5.3 billion. This indicates that this is a big industry that has attracted millions of investors globally, with Dutch investors contributing a significant number. The ban on trading in binary options that seems to be the trend in Europe is definitely going to dent this industry as investors will start exercising more caution on ventures where they put their money.
It’s however worth noting that a complete ban on binary options is literally impossible owing to the nature of the industry therefore, the nature of the bans being imposed are meant to deter potential investors from engaging in them as well raising awareness about their risks.