The Complete Guide to Binary Options Regulations

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The Complete Guide to Binary Options Regulations

The year of 2020 was a rough one for the binary options industry. What happens in 2020 remains to be seen, though things could be shaky due to regulations.

In case you don’t know, binary options trading is a novel take on Forex trading. Rather than actually purchasing currency and waiting for it to bring significant returns, you make a binary choice.

You predict whether a particular currency pair will make gains or losses. You profit if you predict correctly.

Its simplicity has opened up opportunities for new traders and even those who never thought they could become traders.

But these days, binary options regulations are placing pres­sure on li­censed firms. As a result, new un­reg­u­lated brands are blossoming like mold.

If you’re considering options trading, it will help you to now what to expect with binary options regulations.

To be honest, the new regulations are more strict and have led to an outflow of clients. Restrictions on bonus limitations, hot sales tactics, stricter record-keeping and additional transparency requirements have made a big impact.

Add to that broker regulation and it gets messier.

The issue of broker regulation came to the forefront during the Cyprus financial crisis back in 2020 because binary option traders were concerned about the security of their trading accounts.

Popular binary option brokers in the United States are not regulated by the SEC or CFTC.

A regulated broker is almost always regulated by the Cyprus Securities and Exchange Commission which is a member of the European Union.

But using a regulated binary options broker is no guarantee that your funds are safe. CySEC is not the same as the US CFTC in that it does not offer investors the same level of protection of their funds.

The recommendation is that traders open accounts with two different regulated binary option brokers. Then test out the trading platform, test the withdrawal procedures and ensure that making withdrawals is not difficult.

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The regulations are there for a reason.

Keep in mind that if a company is regulated it doesn’t necessarily conduct legal business any more than those that are not regulated are stand-ins for illegal dens of iniquity.

Bottom line – markets and economies can’t function properly without a basic set of rules to ensure physical rights, underpin transactions, and antitrust laws to safeguard fair competition.

Regulation ensures that the company is handling its business in light of the law, and to protect the company from other companies who do not apply to rules of regulation.

It’s safe to say that full regulation around the world still has a ways to go. (Many people in the binary options industry are keeping an eye to Australia, as they seem to be working it out better than most.)

In the meantime, you may want to stick with the regulated or the on-the-process binary options brokers since they’re generally considered by most experts to be a safer bet.

Have you had any experiences – either positive or negative – involving the new binary options regulations? Feel free to share your story.

Complete guide to global Binary Options trading regulations

Global Binary Options trading regulations: what do you need to know? We present to you the breakdown of how Binary Options are regulated all over the world.

15 March, AtoZForex – The online business is normally very widespread, with users being able to access the services from any point in the world. However, when it comes to regulatory activities, they are mostly concentrated on each of the regions. The norms and regulations differ from country to country.

Global Binary Options trading regulations

The same applies when it comes to the regulation of the Binary Options sector. Some countries have completely banned the activity of Binary Options brokers, where some banned online promotion of Binary Options products. Moreover, some of the regulators have banned only particular kind of Binary Options products.

The following breakdown of the Binary Options global regulations will be very useful for traders and brokers all over the world.

North America

In the most part of North America, retail Binary Options are legal for trading. The only limitation here is that they should be traded on one of the authorized exchanges. These include NADEX and Cantor Exchange. Furthermore, in Canada, the regulators oblige any firm that is willing to offer financial instruments to get a license from them. However, Canadian watchdogs do not issue license for Binary Options.

South America

In South America there is no specific ban for Binary Options trading. As a fact, in some of the markets, such as Chile, trading is currently on the rise.

European Union

As for the European Union, companies that have regulations in one country can utilize passporting license under the MiFID. The firms can thus facilitate their operations in all other member states. However, some of the national regulators set restrictions on the Binary Options trading. For instance, France has banned the promotion of Binary Options, where Belgium has completely outlawed the trade.

Middle East

Turning to the Middle East, Cyprus is providing the regulatory norms for Binary Options that restructured it into the leading hub in the region. However, Cypriot neighbour, Israel, has entirely banned the Binary Options for locals. Also, it is working on spreading the message internationally.

Africa

Africa is one of the fastest growing Binary Options market. However, South Africa is the only area, where Binary Options trading is fully allowed.

Asia

As for Asia Pacific countries, Binary Options do not face any regulatory restrictions. Yet, the financial regulators of Australia, New Zealand, Hong Kong, and Japan provide specific norms for Binary Options firms to obtain license.

Think we missed something? Let us know in the comments section below.

7 Binary Options

What is Binary?

The world “binary” means “something that has two parts”. And this is exactly how binary options trading is different from any other trading methods: it has only two possible outcomes – either a complete loss or a complete win. There is nothing in between. Underlying assets may include any currency, stocks, commodities such as gold, indices, etc. In the business world, the binary options trading is a simple way to put your knowledge of the market and its fluctuations to use and take advantage of it by buying put or call.

Need for Regulations

Binary options trading has become increasingly popular around the world and is currently is one of the biggest online trading activities. Traders enjoy this simple way of making money by simply predicting the movements of underlying asset prices. Unfortunately, fraudulent brokers are trying to catch up with the industry growth at the equal pace and rob those less experienced trades of their hard-earned money. To combat this disturbing tendency, many governments decided to implement various regulations to assure all traders have equal opportunity to trade safely and not worry about scams and unreliable brokers.

By now, most countries have their own regulatory bodies that control and issue licenses to binary options brokers operating in that particular countries. Some countries such as the European Union member states accept regulations by other countries. For instance, the most influential and powerful regulatory body in the EU is CySEC (The Cyprus Securities and Exchange Commission), which is located in Cyprus.

Some fraudulent brokers might falsely claim that they have a license issued in some particular country. But the truth is that it’s always the responsibility of a trader to double check and make sure that the broker they have decided to trade with has a valid license and therefore has passed all the necessary procedures and proved to be trustworthy.

Binary options trading industry can be tempting to less experienced traders that hope to earn a lot of money very fast without putting much effort. The reason for this might be the deceptive simplicity of binary options trading. With the choice being a plain “yes” or “no” it is easy to assume that there is nothing much to know. But nevertheless, it is proven that educating oneself about the possibilities on the market as well as various threats when trading is crucial to succeeding in binary options.

Therefore, there has been an increasing need to control the industry and help traders figure out which broker or trading software they can trust. It is necessary to protect investors’ funds from a plain robbery which some fraudulent brokers simply are. So how do those regulatory systems looks like in different countries and what do they exactly do? Let’s try to answer these questions together.

Regulation in the US

In the USA, the federal securities laws do not allow any company to offer or even sell securities unless they are registered with SEC (Securities and Exchange Commission) or there is an exception under which they don’t have to follow with this registration. The binary options contract terms are just the same: unless a registration with SEC is done or an exception is created, the sale of any options is considered illegal.

Nevertheless, some binary options related companies still operate as unregistered brokers or dealers. Any person has to register with SEC in case they provide any services associated with financial transactions or even being a third party to any sort of financial operation.

Another company called NADEX (North American Derivative Exchange) is a CFTC regulated exchange and simply acts to match buyers and sellers. When a binary trade takes place on the exchange where the buyer and seller agree on price, the exchange will charge a small exchange fee for the transaction on each contract executed. In our opinion, Nadex by far has the largest binary option presence in the US.

CFTC Binary Options Regulation

CFTC (Commodity Futures Trading Commission) regulates the US companies under the act of Commodity Exchange. Any company or an individual that provide trade-related services or give advice on trading in the USA have to be registered with National Futures Association (NFA). CFTC, however, assures transparency and open market for everyone in the industry.

Regulation in Europe

In Europe, the situation is quite different. The institution called CySEC (or The Cyprus Securities and Exchange Commission) that we had mentioned earlier is definitely the most influential binary options regulatory body in the region.

Since Cyprus does not have the strongest economies in the region, it is often thought that there is not much of financial regulatory regime in place and it is easy to invest there. However, the reason for investments in Cyprus being popular is the low taxes there. So brokers registered there actually enjoy many benefits just as other financial companies. Those attractive benefits being bonuses and very professional treatment. But the regulations are tough here too: any broker registered with CySEC undergoes complicated procedures and frequent checks in order to be licensed. We often hear of warnings being issued to those brokers that hadn’t met the requirements. At the same time, in our Broker section, we list many brokers that are CySEC licensed and therefore highly reliable to trade with.

Regulation in Australia

A big number of binary options traders comes from Australia as well as many recommended brokers. Australian Securities and Investment Commission is the regulatory body in this region. Any broker or binary options related company operated in the region has to be additionally registered with Australian Finance Services.

Australian traders are also allowed to trade with brokers that are registered in New Zealand. Australian traders are well-known for being highly educated about the industry, trading with high deposits and being very successful in their trading.

Regulation in the UK

The UK has always been known as number one when it comes to Forex trading . And since binary options trading is quite similar, it has also enjoyed a lot of attention here. Also, regulations here are very favorable to traders. UK-based binary options traders are free to work with UK-regulated brokers as well as the brokers that are regulated by any other regulatory body in the European Union.

Previously, binary options trading in the UK was handled by the gambling commission. But since 2020 it is regulated by FCA (Financial Conduct Authority, FCA). At the moment the entire country, however, is undergoing the transition period and we are eager to see what the outcomes will be like.

Regulation in France

In France, binary options are neither illegal nor regulated. Some binary options brokers were banned by The French Financial Markets Authority (AMF – Autorité des marchés financiers) in the past. But at the moment the industry remains a gray area that is yet to become more established here.

Regulation in New Zealand

The authorities of New Zealand have made a step towards binary options traders and not only made binary options trading legal but also did a great job in regulating and assessing the industry. The Financial Markets Authority (FMA) is the regulatory body responsible for assuring binary options is safe and secure in the region.

Regulation in Italy

Finally, the official Italian binary options regulator is called CONSOB. In this aspect, the Italian authorities are quite strict with their regulations and approval. In the past, companies trying to operate without an appropriate authorization in the region were issued fines that reached up to €500,000. Every broker in Italy has to undergo the necessary procedures and obtain a CONSOB license.

CONCLUSION

In the modern binary options industry that keeps growing day by day, the regulations are not only needed but necessary. But apart from any measures that individual countries or regions are undertaking to assure their traders are safe, the traders themselves have to educate themselves and stay informed about all the nuances when it comes to legal matter.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

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