The importance of having modular and quickly adaptable IT solutions in place was recently demonstrated by the ban on the marketing and distribution of binary options to retail investors in Europe by the European Securities and Markets Authority (ESMA) as of 2 July 2018. The prohibition order was only published on 1 June 2018 but came into force on 2 July 2018 being only valid for three months at a time.
In Germany, several issuers have decided to adhere to this ban for their inline, stay-high and stay-low warrants as a precaution due to ESMA’s broad definition of binary options. This prompted factor-i GmbH Zertifikatefabrik to adapt its IT solutions at short notice.
Only when ESMA published the renewal of the ban on 24 August 2018, did it agree to exclude the renewal of binary options in the form of structured securities from the scope, if these issues have an initial maturity of at least 90 calendar days, a securities prospectus has been drawn up and the issuer is hedged and makes a profit or loss only subject to previously disclosed commissions, transaction fees and other related charges.
Andrea Korte, Managing Director of factor-i GmbH Zertifikatefabrik, welcomes the clarification: “The exception from the ban demonstrates that the German market for structured securities is characterized by transparency and investor protection. The securities prospectuses and the Key Investor Documents contain all information necessary to carefully analyse chances and risks of structured securities.