The Sapin Law and the Ban on Trading Advertising

In effect since January 1, 2017, the Sapin 2 law officially prohibited advertising for online trading targeting retail investors. Indeed, it is through the joint efforts of the Autorité des Marchés Financiers (AMF) and the DGCCRF that advertisements surrounding online trading—specifically regarding binary options, CFDs, and Forex—are now prohibited.

Anticipated legislation

It must be noted that for many years, these markets have been characterized by widespread misconduct, driven notably by unscrupulous brokers, as well as by the significant difficulty of managing such market types. In fact, according to various studies conducted on this subject, more than 80% of retail traders are said to lose money on Forex alone. One can therefore imagine that this figure is even higher in a market as volatile as that of binary options.

A true application for brokers?

However, beyond this law, it is conceivable that brokers—given the financial stakes within the retail market—will find ways to circumvent the legislation, despite the €100,000 fine facing any broker caught running online advertisements. The direct consequence of this announcement was, predictably, a sharp decline in the share prices of publicly traded brokers, such as IG Market or FXCM, both of which saw a significant portion of their value evaporate.

What are the implications of this law?

In reality, although this law stems from a beneficial intention, it unfortunately risks being more symbolic than truly deterrent, as indicated by analyses from Courtier-En-Bourse.com. Indeed, as long as brokers are ranked in search engines for queries such as “Binary Options” or “Online Forex,” they will continue to drive consistent traffic.
The lack of advertising may indeed penalize them in the short term, but it is unlikely to deter individual investors, who are often completely unaware of the risks they take when entering such markets without proper training.

Increasing the focus on training needs

In addition to banning advertising, it would have been more prudent to require brokers to fund concrete training programs, supervised by the Autorité des Marchés Financiers, on trading. This would have promoted greater accountability among retail investors and provided them with a true understanding of the complexities involved in online trading.
It is highly probable that if individual investors truly understood the actual difficulty of generating long-term profits through trading—particularly in the highly sought-after, volatile markets such as gold or silver—they would think twice before diving in, or would certainly adopt a much more calculated approach to trading. The perception of the stock market and financial markets as an easy way to make money is something that must be addressed above all else, in order to prevent as many retail investors as possible from being misled about their chances of achieving a return on their investment.