Retail Binary Options Trading in the European Union

Across the European Union (EU), the membership countries have enacted rules that bans the marketing, selling, and distribution of binary options to retail traders (non-professional traders). Retail traders within the EU can still find binary options platforms online and use them, but the companies who are offering these platforms are not based within the EU, and traders will therefore not be trading under the strong trader protection rules that they are used to.

There are countries around the world where retail binary options are well regulated and brokers are licensed and properly supervised, but platforms that deliberately target and accept retail clients within the European Union despite the bans are usually not based in any of these countries. Instead, the companies behind this type of platform will normally register themselves in very lax jurisdictions, to ensure they will not encounter any domestic friction.

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Belgium – trailblazer within the EU

Belgium was the first country within the European Union to implement a nationwide prohibition on the distribution of binary options to retail clients. Belgium thus served as a trailblazer for the rules that would later be implemented by ESMA (temporarily) and the other member-states (permanently).

On 26 May 2016, the Financial Services and Markets Authority (FSMA) of Belgium issued a regulation (approved via Royal Decree) prohibiting the marketing via electronic trading platforms of binary options, other over the counter (OTC) derivatives with maturities less than one hour, and leveraged contracts such as CFDs to retail clients. The retail binary options ban was thus a part of a bigger package, and it specifically targeted electronic trading platforms, not regulated exchanges. The measure entered into force on 18 August 2016.

Motivating its decision, the FSMA noted that many binary option and leveraged derivative offers were made by foreign providers without Belgian authorization, sometimes involving high risks and resulting in consumer complaints.

The temporary ESMA ban in 2018-2019

National prohibitions within the European Union are a relatively recent development. The process began in 2018, when the European Securities and Markets Authority (ESMA) introduced a product intervention measure prohibiting the marketing, distribution, or sale of binary options to retail investors throughout the EU. This measure was temporary, as ESMA did not possess the authority to implement a permanent, EU wide ban. Its primary objective was to protect consumers while individual Member States determined their preferred approach to regulating binary options at the national level.

The initial temporary prohibition on the marketing, distribution, or sale of binary options to retail clients was adopted on 27 March 2018 and became effective on 2 July 2018. ESMA subsequently renewed the prohibition for an additional three-month period commencing on 2 October 2018, and again on 2 January 2019 and 2 April 2019. On 1 July 2019, ESMA announced that it would not extend the temporary prohibition further. Consequently, the measure expired at the close of business on 1 July 2019.

The national bans within the EU

The ESMA ban was only temporary, intended to provide immediate consumer protection while the respective member-states made their own decisions about how to regulated retail binary options. Eventually, all the member-states enacted their own national rules, with many of them adhering closely to the temporary ESMA ban. Today, retail binary options is therefore something that is regulated on the national level.

Examples of national bans

Netherlands: Authority for the Financial Markets (AFM)

• 19 April 2019. Permanent national ban enters into force, prohibiting binary options to retail investors.

Finland: Financial Supervisory Authority (FIN-FSA)

• 17 June 2019. National product-intervention decision takes effect, prohibiting the marketing, distribution, or sale of binary options to retail clients.

France: Autorité des marchés financiers (AMF)

• 2 July 2019. National intervention measure comes into force, continuing the ESMA prohibition at national level.

Czech Republic: Czech National Bank (CNB)

• 2 July 2019. National prohibition takes effect, maintaining the restriction once ESMA’s measure expired.

Poland: Polish Financial Supervision Authority (KNF)

• 2 July 2019. KNF’s national decision becomes effective, permanently banning binary options for retail clients.

Germany: Federal Financial Supervisory Authority (BaFin)

• 2 July 2019. BaFin’s national prohibition enters into force, replacing ESMA’s temporary measure on its expiry date.

Croatia: Croatian Financial Services Supervisory Agency (HANFA)

• 1 August 2019. Permanent prohibition enters into force, covering marketing, distribution, or sale of binary options to retail clients.

Latvia: Financial and Capital Market Commission (FCMC)

• 1 August 2019. National permanent restrictions take effect, prohibiting binary options to retail investors.

EEA countries and the retail marketing, selling, and distribution of binary options

The European Economic Area (EEA) consists of all the EU member-states + Norway, Iceland, and Lichtenstein. All these countries are European Free Trade Association (EFTA) countries. Within the EEA, the countries operate under the same EU-level financial-services rules, including MiFID II/MiFIR. Notably, Switzerland is an EFTA country, but is not included in the EEA. Switzerland has its own separate regulatory framework for financial services.

Both Norway, Iceland, and Lichtenstein have national bans against the marketing, distribution or sale of binary options to retail clients.

• In 2018, Fjármálaeftirlitið (Financial Supervisory Authority of Iceland) stated that the marketing, distribution or sale of binary options to retail clients is regarded as contrary to proper and sound business practices under the Securities Transactions Act No. 108/2007.
• In January 2020, Norway formally notified ESMA that it was adopting a permanent national product-intervention measure. ESMA issued an Opinion (ESMA35-43-2172) confirming that Norway’s measure was consistent with EU law. Since then, a permanent retail binary options ban has been in place in Norway.
• In Lichtenstein, the Finanzmarktaufsicht Liechtenstein (FMA-Liechtenstein) has issued a General Ruling which states that the marketing, distribution and sale of certain binary options to non-professional investors in and from Liechtenstein is prohibited. The ruling has been in effect since February 2025.

What counts as “binary options” in EU/EEA?

To find out the exact definitions, one needs to look at country-specific rules, as retail binary options are regulated at the national level within the EU/EEA. With that said, regulators are putting emphasis on the main characteristics of the binary option contract, including a payoff that is fixed in cash, the all-or-nothing result at or before expiry, and the win/loss being contingent on a simple yes/no condition such as “price above level X at time T” or “touch/no-touch of a barrier.”

The bans are technology-neutral and venue-neutral. If the contract functions as a retail binary option, it is caught by the ban. With that said, some limited carve-outs did exist in the temporary ESMA ban and have been mirrored national texts, chiefly exceptions involving certain long-dated, securitised binaries with an approved prospectus, and certain structures where the minimum fixed payout is at least equal to the price paid. This is not what the typical retail binary options platform is interested in selling and promoting, so the exceptions have, at least so far, not opened the door for any of the conventional platforms found outside the EU/EEA.

Professional traders

The national prohibitions within the European Union are all about retail protection, and do not cover professional traders. With that said, simply calling yourself a professional trader is not enough to circumvent the ban. Reclassification from retail to professional is tightly policed under MiFID II and cannot be used as a shortcut for speculative retail flow. A genuine professional client must satisfy requirements regarding assets, portfolio size, and experience tests, and even then, national measures often constrain distribution practices.

Under MiFID II (the Markets in Financial Instruments Directive II.Directive 2014/65/EU), a professional client is a client who possesses the experience, knowledge, and expertise to make their own investment decisions and properly assess the risks involved.

MiFID II distinguishes between three types of clients:

1. Retail clients – highest level of protection.
2. Professional clients – presumed to be more knowledgeable and experienced.
3. Eligible counterparties – least level of protection (typically institutions).

Certain entities are automatically considered professional clients, and this group includes investment firms, credit institutions, insurance companies, collective investment schemes, pension funds, governments, and more. Large undertakings can also be included automatically if they meet certain requirements for balance sheet total, net turnover, and/or own funds.

As an individual trader, you are never automatically considered a professional client. Instead, you must request to be treated as a professional trader and show that you meet the criteria. The process is known as “opting up”. The brokerage company will be required to make an adequate assessment of your expertise and experience. You must fulfill at least two of these three requirements:

(1) The client has carried out transactions, in significant size, on the relevant market at an average frequency of 10 per quarter over the previous four quarters.
(2) The size of the client’s financial instrument portfolio, defined as including cash deposits and financial instruments, exceeds EUR 500,000.
(3) The client works or has worked in the financial sector for at least one year in a professional position which requires knowledge of the transactions or services envisaged.

The requirements are found in Annex II of Directive 2014/65/EU (MiFID II), Section II (“Clients who may be treated as professionals on request”).

Trading retail binary options within the European Union

For retail clients resident in the European Union, using a non-EU binary options broker is possible, but the broker is violating the national bans, and you do not have the same trader protection as you would have with a broker licensed by a EU membership country.

Binary options companies that are marketing/selling/distributing binary options to retail clients in the EU know what they are doing, and are usually based in very lax jurisdictions where the local authorities would not intervene even if the authorities in Europe would ask them to. Trader protection rules of the type we are used to within the EU are usually absent, or simply not enforced in a predictable way.

The national member-state bans do not target the individual consumer who is purchasing a binary option. The bans target the seller, and are intended to protect consumers, not punish them. Regulation chiefly focuses on the firms that market, distribute, and sell investment services to clients within the EU, not on punishing consumers who place orders. MiFID II and national transpositions require providers to be authorized by a competent authority, to operate within their permission set, and to follow conduct rules that include best execution, fair marketing, and appropriate product governance. An broker that is not authorized in an EU member state, does not passport services into the EU, and still targets EU retail clients is the party in breach.

Sometimes, retail binary options platforms use this legal construction in their sales-pitch. “It is legal for you, so why not?” The problem with this is that you will be trusting your money and personal information with a foreign entity, and if something goes wrong, your local authorities can not do much about it. They do not have the power to shut down the broker or freeze company bank accounts and force a misbehaving broker to finally process your withdrawal request.

What matters is not whether you can sign up and make a deposit, but what happens when the platform misprices, delays a withdrawal, locks your account during “compliance checks,” or disappears altogether. Inside the EU perimeter, conduct rules, client-money protections, disclosure standards, and complaint routes exist precisely to protect you in those moments. Outside it, you are negotiating on the firm’s paper, in its home court, with little practical recourse. By stepping outside the EU´s protection, you lose the benefit of local supervision, the investor-compensation scheme that applies to authorized firms, the client-asset segregation regime that keeps firm money and client money apart, and the complaint and redress paths that force a response. You accept the platform’s choice of law and forum clauses, which typically point to a distant jurisdiction and bind you to arbitration or courts you cannot easily reach. In practice, the question “is it legal for me” misses the point that matters most: the loss of enforceable rights after you send funds.

The fact that you can legally purchase retail binary options within the EU by signing up with a non-licensed platform does not mean that it is safe to do so. When you chose this route, you remove remove the membership state financial authority that would oversee the firm, the segregation that would fence your money, the compensation scheme that would soften a failure, the conduct rules that would govern execution and marketing, and the domestic complaint channels that force responses. It adds custody uncertainty, withdrawal friction, pricing opacity, identity exposure, banking trouble, and thin recourse if something goes wrong. The entire EU framework (authorisation, passporting, product governance, and intervention powers) exists to put guardrails around certain counterparty risks. Choosing to step outside them is a choice to accept all of the downside with very little of the upside.

If you want access to leveraged trading or timed bets with a capped downside, there are supervised routes available from licensed brokers inside the EU that come with clear limits and real redress, e.g. vanilla options, mini futures, and contracts for difference (CFDs).

Offshore Retail Binary Options Platforms – Examples of common complaints

Below we will take a look at a few examples of common complaints reported by consumers who have been using offshore retail binary options platforms that accept retail traders from the European Union. Since selling retail binary options is not permitted in any of the EU countries, any platform that is willing to do this is not acting in accordance with the rules. It is either based in a EU country and violating the rules anyway (very uncommon nowadays) or it is licensed outside the EU, most likely in a lax jurisdiction where the local authorities do not mind that this company is violating the European bans.

Custody issues

EU-authorized brokers must keep client money in segregated accounts at approved banks, reconcile daily, and document where assets sit. Financial service firms based in lax jurisdictions often pool deposits with operating cash, move funds through sketchy third-party processors, or hold balances in a country you did not agree to. If that money is frozen by a correspondent bank or seized during an investigation, you become an unsecured claimant with no priority and no domestic regulator to push your case. The same is true of the brokerage becomes insolvent after co-mingling money.

Stalled withdrawals and frozen accounts

A common problem with offshore retail binary options providers is stalled and refused withdrawals. Bonus terms that require impossible turnover, document requests that are never approved, “security reviews” timed to outlast card chargeback windows, and minimum withdrawal thresholds that keep creeping higher are standard patterns.

Execution opacity

Without legally required best-execution obligations, price feeds can lag or freeze at convenient moments, stop orders can trigger on ticks you cannot verify, and dispute logs can remain internal or be tampered with before release. Having your broker as your counterpart in each trade introduces a conflict of interest, since the broker profits when you lose, and vice versa. This model can work well when a broker is supervised by a strict financial authority. When such supervision is absent, the risk of the trading falling victim to improper broker behaviors increases dramatically.

Identity-theft

The passport or ID-card scans, utility bills, and selfies you upload can be mishandled or misused, and you can find yourself facing problems that are much more serious than losing that first €50 deposit.

Banking, tax, and compliance spillovers

Your bank and card issuer do not see “just a fun little hobby online”. They see merchant category codes, unusual payment processors, cryptocurrency on-ramps, and offshore transfers, and your deposits and withdrawals can trigger automated monitoring. You risk ending up on internal watchlists. None of this is illegal activity on your part, but it looks like risk to institutions that must enforce anti-money-laundering rules.

On the tax side, a messy broker can lead to problems. Poor statements and missing cost data can turn tax season into a headache, and “the broker disappeared” is not a defense against a filing obligation.

If a retail binary options platform enters an enforcement spotlight later, you may need to show documentation regarding you dealings with this entity, so make sure you keep records.

Dispute reality: what recourse looks like in lax jurisdictions

Winning a claim against an offshore broker is not impossible, but the path can be slow, expensive, and stacked against you. You will argue over jurisdiction and governing law before you even reach the merits. Serving proceedings across borders takes time. And even if you obtain a judgment, enforcing it where the company holds assets will be a new obstacle. There will not be a reputable financial authority in your corner, fighting for your rights against the broker.

Alternatives to Binary Options

If you want to speculate on financial markets, there are several instruments available that you can use on regulated platforms that operate within the European Union under proper authorization, and where you will be protected by applicable trader protection rules. Therefore, there is really no need to go down the risky path of binary options. Examples of alternatives that you can look into are contracts for difference (CFDs), vanilla options traded on regulated exchanges, exchange-traded funds (ETFs), spot forex trading, and conventional stock trading.

CFDs

A contract for difference (CFD) is a financial derivative that allows a trader to speculate on the price movement of an underlying asset (stocks, indices, commodities, forex, cryptocurrency, etc.).

CFDs are not traded on formal exchanges like stocks or futures. Instead, you enter a contract directly with a broker (the broker is the counterparty). The broker may hedge its exposure internally or via external markets, but the client trade itself is over-the-counter (OTC).

When you enter into a CFD, you agree to exchange the difference in price of an underlying asset from the time you open the contract to the time you close it. If you believe the price of the underlying is going up, you “go long”. If you believe the price of the underlying is going down, you “go short”.

If the price moves in your favor, you profit. If it moves against you, you lose.

With a CFD, it is easy to speculate on both upwards and downwards trends, and you can keep your stake very small. This makes CFDs a popular alternative to binary options among small-scale retail clients who want both the flexibility and the small stake size.

Legality in the EU

Retail CFDs are legal in the EU, but they are heavily regulated under MiFID II and ESMA rules. Retail CFDs in the EU are regulated at both the EU (ESMA) and national level, an the financial regulator (NCA) in each member-state is responsible for authorizing and supervising brokers in its jurisdiction.

Examples of rules that are in force for retail CFDs:

• Leverage limits
• Negative balance protection (retail clients cannot lose more than their account balance)
• Margin close-out rules (positions automatically closed if losses exceed a threshold)
• Standardized risk warnings

The maximum leverage for retail CFDs depends on the underlying asset type:

• For major currency pairs, the maximum leverage is 30:1.
• For non-major currency pairs, the maximum leverage is 20:1.
• For major indices, the maximum leverage is 20:1.
• For commodities (excluding gold), the maximum leverage is 10:1.
• For gold, the maximum leverage is 20:1.
• For shares, the maximum leverage is 5:1.
• For cryptocurrencies, the maximum leverage is 2:1.

Vanilla options

A vanilla option is a standard, exchange-traded or OTC option with basic call/put characteristics. A vanilla call option gives you the right to buy the underlying asset at a set strike price before or on expiry (depending on the option style). A vanilla put option gives you the right to sell the underlying asset at a set strike price before or on expiry (depending on the option style).

They are called vanilla options analogous to the idea that “plain vanilla” is the standard ice cream flavor.

Legality in the EU

Vanilla options are fully legal for retail investors in the EU and they are traded on many regulated exchanges and via MiFID II-regulated brokers.

Retail vanilla options in the EU fall under MiFID II regulations, so brokers must comply with a list of requirements, including:

• Suitability and appropriateness tests. Broker must assess whether the product fits the retail client’s knowledge, experience, and risk tolerance.
• Disclosure of risks. Potential loss, margin requirements, and leverage (if applicable) must be clearly disclosed.
• Leverage caps and negative balance protection for leveraged OTC options. Exchange-traded vanilla options are usually not leveraged in the same sense as CFDs, but OTC vanilla options can be leveraged, and if sold to retail clients in the EU, they must comply with ESMA CFD-like protections, including leverage caps and negative balance protection, depending on the structure.

Examples of exchanges where vanilla options are traded

• Eurex Exchange (Germany). A major derivatives venue offering options across equity, index, interest rate and other underlyings.
• Euronext (Pan European: Belgium, France, Netherlands, Portugal, Ireland, etc.). Chiefly offers single stock options and index options.
• Cboe Europe Derivatives (CEDX) (Pan European). Offers equity options on a wide range of European stocks (300+ companies from over a dozen countries).
• Nasdaq Copenhagen (Denmark). While more known for equities, it is part of the Nordic option landscape via Nasdaq Nordic.

ETFs

An exchange-traded fund (ETF) is similar to a mutual fund, but the shares are listed on an exchange, and traded in way that is similar to stock trading. ETFs are commonly used by investors, but since the shares are traded throughout the trading day, you can also use ETFs for short-term speculation if you want to. The fund share price will change throughout the trading day, based on market demand and supply.

The United States it the largest ETF market, but there are also ETFs that are based in and listed in other parts of the world, including Europe.

Legality in the EU

ETF trading and investing is legal for retail investors in the EU and regulated brokers can offer ETF trading and investing to retail clients. ETFs are regulated under MiFID II (like stocks) and retail trader protection rules apply to brokers. Among other things, brokers must carry out suitability and appropriateness tests, i.e. check and assess your experience and knowledge. Risks, fees, and leverage (when applicable) must be clearly stated.

Examples of exchanges and ETFs

Examples of exchanges within the European Union where ETFs are listed:

• Euronext (France, Netherlands, Belgium, Portugal, Ireland)
• Deutsche Börse / Xetra / Eurex (Germany)
• Borsa Italiana (Italy)
• Nasdaq Nordic (Sweden, Denmark, Finland)

Examples of EU-listed ETFs:

• iShares Core MSCI World UCITS ETF (IWDA)
• Lyxor MSCI World UCITS ETF (WLD)
• Xtrackers MSCI Emerging Markets UCITS ETF

European ETFs are generally UCITS-compliant, meaning they meet EU regulations for retail investor protection.

Day trading ETFs

One of the attractions of binary options is that they can be purchased with very short time-frames. If you are looking for short-term intraday speculation, ETF trading also fits the bill, and is much safer (when it comes to counterparty risk) than binary options trading, provided that you pick a broker licensed by one of the EU member-states.

Retail ETF day trading is legal in the EU and retail traders are allowed to use leverage, subject to ESMA rules. Some retail brokers support both long and short positions.

ETFs track a basket of assets and intraday volatility tend to be lower than individual stocks. For a daytrader, it is important to pick an ETF with sufficient liquidity, to avoid the issues tied to poor liquidity. Generally speaking, 2x/3x leveraged ETFs are popular among daytraders, as they exhibit more volatility. Leveraged ETFs are legal for retail traders in the EU, but the broker must provide warnings and risk disclosures under MiFID II. Leveraged ETFs decay over time due to daily rebalancing and are generally unsuitable for holding long-term. Volatility ETFs track volatility indices such as VIX.

Exposure

ETFs can be used to gain exposure to many different asset types, including equity (e.g. broad market, sector, country/regional, and dividend ETFs), bonds, commodities, exchange-rates, and REITs.

Thematic ETFs focuse on specific themes. Examples:

• ESG / Sustainable ETFs: iShares MSCI World ESG Screened ETF
• Robotics / AI ETFs: Global X Robotics & AI ETF (BOTZ)
• Clean energy: iShares Global Clean Energy ETF (ICLN)

Spot forex trading

Spot forex trading is when you are buying and selling currencies on the foreign exchange market at the current (“spot”) exchange rate. Example: Buying EUR/USD at 1.1000 means you pay 1.10 USD for 1 EUR at that moment.

Spot transactions are usually settled within T + 2 days (trade date + 2 business days), but there are exceptions.

If you are interested in short-term trading, the best choice on the forex market is usually major currency pairs, as they are extremely liquid, which in turn helps keep spreads tight.

The spot forex market is over-the-counter (OTC) and trading is continuous 24/5. Examples of major hubs for forex trading are Tokyo, London, and New York City. If you do not want OTC trading, you can skip the spot forex trading and go for forex futures instead, as they are standardized contracts traded on exchanges.

Legality in the EU

Retail forex spot trading is legal in the EU, and both MiFID II and national rules apply. EU retail clients can trade spot forex through brokers who are licensed in any of the member-states.

Forex brokers almost often offer leverage. To protect retail investors, ESMA´s standard leverage caps apply. This means max 30:1 on major currency pairs and max 20:1 on minor currency pairs. No specific cap is stated for exotic currency pairs, but ESMA´s general rules regarding very high-risk products apply. No specific cap has been stated at the EU level for exotic pairs due to very low retail volume, high heterogeneity, and the principle of proportionality.

With leverage, brokers must provide retail accounts with negative balance protection and clear risk warnings.

Stock trading

Instead of using binary options to speculate on short-term stock price movements, retail traders in the EU can go for conventional stock trading and skip the binary option.

Examples of stock exchanges in the EU:

• Deutsche Börse (Xetra, Frankfurt)
• Euronext (Paris, Amsterdam, Brussels, Lisbon)
• Borsa Italiana (Italy)
• Nasdaq Nordic (Sweden, Denmark, Finland)

Examples of stock brokers for retail traders in the EU:

• DEGIRO. Fast enough for short-term trades, including day trading.
• Saxo Bank. Professional-grade platforms (SaxoTraderGO / SaxoTraderPRO) with advanced charting and order types, suitable for short-term trading, including intraday trading.
• Interactive Brokers. Very fast, with direct access to multiple exchanges and advanced tools (IBKR TWS, API).

Legality in the EU

Brokers in the EU are allowed to offer consumers both stock trading and stock investing, including daytrading. Brokers must be authorized in accordance with MiFID II.

For margin accounts, retail leverage is capped at 5:1 for individual stocks/shares. If you instead speculate on stock indices, e.g. using CFDs, the broker can give you up to 20:1 as long as it is a major stock index.

Retail accounts must have negative balance protection. Brokers must perform suitability and appropriateness assessments and provide clear risk disclosures.