The majority of Canadian securities regulators recently published for comment proposed rules making it clear that offerings of binary options in Canada may not be advertised, offered, sold or otherwise traded to an individual in Canada. The CSA emphasized in its notice that currently no offering of these products, including by a broker, dealer or platform, has been authorized in Canada. Further, all offerings of these products in Canada are illegal, with only a limited and narrow exception for transactions with highly sophisticated investors.

The CSA notes that many binary options offerings in Canada, as well as the platforms selling them, have been identified as vehicles to commit fraud. In many cases, no trading takes place on these online platforms at all and the operation is purely a fraudulent scheme to take money from individuals, including through cash advances processed on the target’s credit card.

A binary option is generally understood to be an option in which the payoff is either a fixed amount or nothing at all. One of the central questions the CSA seeks comment on is whether the proposed definition of “binary option”, as outlined in the proposed rules, captures contracts or instruments that should not be captured.

In Ontario, the comment period for the proposed rules is open until July 28, 2017.