Italy has begun the process of banning binary option brokers from trading anywhere in the country. According to the reports that were first posted by Italian language news sites late last month, the Italian financial regulator, Consob, has decided that binary options too closely resemble gambling and after conducting preliminary investigations, the Judge of Rome, on the order of the Public Prosecutor of Rome, has directed Italian ISPs to block numerous binary options cites from appearing in Italy.
The banned sites are ipotion.com, tradersmarter.com, bocapital.com, eztrader.com, startoptions.com, and anyoption.com, all of which are based in Cyprus. This is just another nail in the coffin of the Cyprus banking business which has already taken a heavy beating these last few months.
The firms mentioned above have been deemed to not be in compliance with Italian financial rules mainly due to the way the binary option product is marketed. In addition, since binary options are defined as a regulated instrument under MiFID rules, selling the product requires approved EU regulation which these firms do not have.
Binary options have already been scrutinized by regulators in other countries. The Japanese FSA sent a note a year ago to brokers to suspend the marketing of new binary brands while it worked to create laws to govern the product. And in a similar sudden move, the Turkish Capital Markets Board published a document in June 2012 that accused several binary options brokers of criminal activities and had ISPs block their IPs into Turkey.
Lawyer Folio Tarzana, of Tarzana and Partners, told reporters that "?Consob believes that binary options are more similar to gambling than to financial services." He believes that "?Financial watchdogs in Italy" had complained last year about binary options trading and despite the warnings that were issued they were totally ignored by the brokers.
The "?mistake" taken by marketers is the way in which they have been promoting the binary option: as a ‘win or lose' payout. As regulators receive more and more complaints from clients, they will become more proactive in preventing unregulated firms from marketing in their countries. France and Spain have already issued warnings to firms in the past which may lead to more aggressive moves now that Italy has set precedence within the EU.
Some of the industry's top-rated brokers have already been banned for Italian traders for the foreseeable future, but at the moment, there are still other companies that can be used for trading binary options, including OptionFair. However, according to Sarzana, "?this is probably just the first step" in the process and many other binary options companies are likely to be affected in the coming weeks and months.