The binary options industry has come a long way compared to how it was perceived just five years ago.
At one point in time, it wasn’t uncommon for investors and regulators to look at binary options trading as nothing more than pure gambling, but today, thanks to regulators taking a more serious approach to binary options and traders seeing it as a legitimate form of financial investing, today’s industry is more similar to the online Forex trading industry while it was in its own infancy.
With this, let’s take a look at three countries who have taken regulatory action to make binary options a safer, more transparent way to make money from the financial markets.
Cyprus-based binary options brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). Most regulated brokers will use a CySEC license because its regulation requirements are not as restrictive and their expenses are much lower compared to other regulatory agencies.
CySEC first entered the binary options industry in 2012. But because client complaints continued, even against brokers carrying a CySEC license, preventative safety measures have continued to make trading fair for the clients.
In March 2016 CySEC issued new regulatory requirements to its brokers and their platform providers. A few of their recent changes include:
- Banning 30 second options
- Traders must be able to see not just the name of the contract they’re trading, but the specific exchange the price is coming from. Using crude oil as an example, the platform must display “WTI Crude Oil NYMEX May 2016.”
- Brokers must disclose how they determine a contract’s strike price, and must publicize the data feed they use for their prices
- Clients who believe they were not given the exact strike price they intended to purchase a contract under must be able to cancel the contract within the first three seconds
For brokers to legally operate in the United States, they must register through the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC). Regulation is overseen by the Financial Industry Regulatory Authority (FINRA).
In the US, binary options brokers must use a regulated exchange and operate on a market maker price model, as opposed to the commonly used over the counter price method that has been banned in North America.
Currently, NADEX is the only regulated binary options firm who serves as a Designated Contract Market (DCM), rather than a brokerage service. NADEX issues warnings against unregulated brokers in the US, such as Daily Options, who was illegally gaining access into investors NADEX trading accounts.
Currently, there are no regulated binary options brokers based in Canada. Canada’s financial regulatory body is composed of thirteen market regulators across each respective province, labeled the Canadian Securities Administration (CSA).
In early 2016 the CSA issued a release warning citizens that they should beware of binary options as they are not legally registered to offer binary trading products. Even though trading binary options is considered illegal, it is growing in popularity across the provinces.
Luckily each province is constantly issuing warnings to investors concerning specific brokers who are accused of conducting shady or illegal business practices. Unfortunately, because there are no regulatory guidelines to allow a binary options broker to operate in Canada, the CSA groups trusted regulated brokers alongside illegal ones.
While there is still no framework for regulating binary options in Canada, their recent announcements might just be the first steps citizens need to vocalize the need for province-by-province regulation.
Learn more at the following website:
Binary Options Regulations http://www.binaryoptionsregulations.net/