Following clarification by the European Commission of the relevant issues in terms of the Markets in Financial Instruments Directive, 2004/39/EC, (MiFID), it has been determined that binary options fall within scope of the Directive.
The Malta Financial Services Authority has issued a circular providing clarity as to the regulatory status of binary options business in Malta. The MFSA has stated that following clarifications provided by the European Commission, binary options business in Malta will be deemed to fall under the Markets in Financial Instruments Directive, which is implemented in local legislation through the Investment Services Act. The MFSA's circular provides that 'binary options are contracts based on the direction the price an underlying asset will take within a specified time frame'. Binary options are described as 'a type of derivative contract with only two possible outcomes that depend on whether the forecast price is correct or incorrect'.
