09/02/2021
The NBS wishes to warn citizens of various electronic platforms that advertise the “services” of binary options trading, promising to their clients “fast and easy money”. These are high risk transactions, often involving different types of fraud, and are offered by platforms that are not subject to regulation, inspection or supervision by the Serbian authorities. No one can provide investment and broker-dealer services in Serbia without being licensed to do so by the Securities Commission. We therefore recommend to citizens to check, before deciding to entrust their money to someone or to invest in a financial product, whether the person or platform concerned holds the licence to provide investment and broker-dealer services and investment advice. This information is available on the Securities Commission website that features, inter alia, the register of broker-dealer companies and the register of investment advisers, licensed by the Commission.
A binary option is a financial derivative where you can trade on different types of underlying assets – commodities (e.g. oil), stock exchange indices, currency pairs, stocks of large companies, such as Apple Inc., Tesla Inc. and similar. The payout depends entirely on the outcome of the prediction whether the price of an asset will rise above or fall below a specific level, within a set timeframe. Namely, in a binary option you are trying to predict the direction in which the price of the chosen asset will move (up or down), as well as the timeframe for such movement (1 minute, 15 minutes, 60 minutes…). If the prediction is correct, you receive the fixed pre-agreed payout (usually 70–80% of the stake) from the broker firm (electronic platform), while if the prediction is wrong, you lose the initial stake (100% of the stake).
As we are talking about speculating the price moves over a rather short period of time when prices are usually not shifted by fundamental indicators, it is particularly important to be versed in technical analysis based on tracking historical data and use of graphic presentations so as to identify appropriate patterns in the movement of the price of the underlying asset which can, though not necessarily, predict future price moves successfully. Such trading strategy focused on the short term is considered highly risky, even for more experienced investors. Investment in binary options therefore has many characteristics of betting.
The earnings of platforms for binary options trading are mainly based on the following:
As a consequence, a trader on binary options usually loses money (the system is designed so that the odds are on average in favour of the platform).
Internet platforms offering these “services” do not meet the necessary regulatory requirements, which gives rise to numerous fraudulent actions:
The main channels for promoting these platforms are websites and social media that have a huge outreach. Their popularity is constantly rising, consistent with the increasingly intense use of social media, especially now during the pandemic when much time is spent using electronic devices. The ads targeting potential users mostly promise quick earnings, as well as a number of luring “benefits”:
The potential dangers from binary options trading have been also recognised by the European regulators, who took regulatory measures to prohibit temporarily or permanently the marketing, distribution and sale of binary options to households (retail investors). Thus, the European Securities and Markets Authority (ESMA) renewed the ban several times during 2018 and 2019. As of July 2019, most of the EU member states (25 member states plus some non-member states such as Norway and the UK) introduced a permanent ban on the marketing, distribution and sale of binary options to retail investors.
Numerous dangers and risks in binary options trading and the associated fraud were pointed out also by the US regulators and the FBI.
Once again the NBS urges citizens to be cautious and to analyse in detail all the risks of a potential investment in these and similar products that are considered highly risky and may lead to considerable losses.
Governor’s Office
