The Canadian Securities Administrators (CSA) have announced the implementation of Multilateral Instrument 91-102 Prohibition of Binary Options, which makes it illegal to advertise, offer, sell or otherwise trade binary options shorter than 30 days with any individual. Binary options take the form of a wager in which investors bet on the performance of an underlying asset, often a currency, commodity, stock index or share. The timeframe for the bet is usually very short, and can even be hours or minutes. When the time is up, the investor either receives a predetermined payout or loses the entire amount. In many instances, no actual trading occurs and the transaction takes place for the sole purpose of stealing money. The firms and individuals involved in the operation of binary options trading platforms are often located overseas, making it impossible for investors to get their money back if something goes wrong. For more, see the CSA Notice of the Multilateral Instrument and Companion Policy and the article by John O’Kane of the Globe and Mail regarding the announcement.
Earlier this year, FAIR Canada submitted comments that binary options are harmful for investors by their very design and not just in cases of fraud. FAIR Canada also commented in its submission that it wanted to see: 1) Greater coordination of enforcement with other jurisdictions; 2) Extending the ban for binary options as presently outlined in the proposal to options that have more than a 30 day period for meeting the pre-determined condition; and 3) Improving the system for checking registration and other background information of registrants.