Dutch AFM Regulates Binary Options
Dutch binary options regulation has changed the face of binary options regulation in general as they are the first major European regulator to grasp the nettle and regulate the instrument as an investment.
The European binary options industry can be seen as taking a major step forward yesterday when the Dutch financial regulator, Autoriteit Financiële Markten (“AFM”), conceded and issued a license to operate to OptieClub.nl BV, a Dutch binary options provider.
As the below press release by the Gaming Legal Group states, the AFM regulator did not go quietly and on the AFM’s own site there today is still mutterings that they believe their refusal to grant a license was justified. The fact is that if the AFM did not award the license a daily fine of €10,000 would be levied by the Court against the AFM which clearly left the AFM with little room to manouevre.
The AFM argued amongst other things that the binary options that OptieClub were due to offer clients were not [after translation] “cost efficient, useful, safe and understandable”. I am of the belief that those very same attributes apply to a ticket to watch Tottenham Hotspur FC try and play football at White Hart Lane, but that doesn’t mean the tickets should be banned………..
Gaming Legal Group & BAIS Legal
Pats on the back should be awarded to Bas Longman and Hester Bais for driving through this legislation that now offers binary options operators a new choice of regulator to those already in the space, in particular CySec. The following Press Release was taken from the Gaming Legal Group‘s site although there is a certain irony in the fact that the major plank of the AFM’s argument was that binary options are gambling/gaming, not investments.
P R E S S R E L E A S E
1 April, 2015
Today, the Dutch financial watchdog Autoriteit Financiële Markten (“AFM”) issued the first Dutch binary options license, in line with the Markets in Financial Instruments Directive (“MiFID”) The license was issued to Optieclub (translates: Optionclub). AFM issued the license under protest. On January 16, 2015, AFM already was summoned by the Rotterdam Administrative Court to issues a license to Optieclub. When she refused, the lawyers of Optieclub: Bas Jongmans (Gaming Legal Group) and Hester Bais (BAIS Legal) successfully requested a preliminary injunction. To prevent yet another, second request for a preliminary injuction, imposing penalties on AFM, the financial watchdog “caved in” and awarded Optieclub with her license. AFM was served to appear in civil court on April 7, 2015.
In light of earlier developments, it was doubtful if AFM would actually issue a license. In AFM’s statement of today ) AFM states dat the offering of binary options is illegal since binary options should be regarded (next to financial instruments) as illegal games of chance. AFM has however not been successful in convincing the courts. The Rotterdam Administrative Court as well as the CBB Appeals Court ruled that AFM should immediately issue a license to Optieclub. Optieclub could no longer be expected to wait for its license, pending further litigation on the matter. The issuance of the license today marks an important step in the development of regulation of binary options as financial instruments within the Netherlands, since with this issuance, AFM has confirmed that binary options shall be regulated by AFM in the Netherlands and as a result, license holders will be allowed to enter the European market, using a “European Passport”. Details of the license are currently being studied by Optieclub’s attorneys: Bas Jongmans (Gaming Legal Group) and Hester Bais (BAIS Legal). Details shall be made available at a later time or may be requested.
Details on the awarded preliminary injunction may be found here: http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:CBB:2015:77
AFM’s statement on the matter may be downloaded here: http://www.afm.nl/nl/consumenten/actueel/nieuws/2015/apr/optieclub.aspx
Gambling or Investment
Yet again this old chestnut is thrown to the fore with the AFM stating that since the binary options due to be offered are of only one hour duration they are more akin to gambling and therefore should be regulated by the Dutch gambling authority. And yet again I suggest that when High Frequency Trading, where bids and offers can be entered and pulled, where trades can be turned around in nano-seconds, when HFT is deemed gambling then short-term binary options could be considered the same. Would a binary option trade placed now on Holland to win the next World Cup in over three years time be an investment?