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May-18-2016 12:59printcomments

Regulation in Binary Options Trading

Learn how the binary options trading industry is regulated around the world, and gain an understanding of why regulation is important for investors.

financial market
As regulations in the binary options industry become more of a talking point, it’s a good idea to understand the basic rules.

(SALEM, Ore.) - All around the world, binary options trading is being reclassified, from being in the same arena as gambling, to being a regulated financial instrument. In fact, by mid-2016, the UK is set to implement new FCA rules that will have serious effects on binary options trading.

This is a major shift from four or five years ago, when binary options were a fringe investment that not many investors were interested in risking.

As regulations in the binary options industry become more of a talking point, it’s a good idea to understand the basic rules that are already in place, and how regulation can or should affect your choice in binary options brokers.

The Bottom Line

Let’s begin with why the average investor should care about regulation at all. The binary options trading industry relies on all investors putting up a deposit of cash before they begin trading. In order to do that, brokers or trading platforms have to have a place to electronically store investment cash.

The biggest advantage of regulation in the industry is that it requires deposited investments to be kept in a secure system that is monitored by third parties. For you, this means that your bottom line is kept secure and guaranteed while you go about trading.

There are other advantages to regulation, namely that it provides investors protection from scams and keeps brokers safe from the consequences of non-regulated brokers who break the law. But regulation is different around the world, so when you are dealing with an international market, you must take into account what the laws are in each country or region.

Just because you see an unregulated broker doesn’t mean it’s a scam; their country may not require the same types of regulations as your own.

Cyprus Securities and Exchange Commission

The CySEC is an independent regulatory agency for the binary options trading industry that offers brokers a way to become regulated by a third party. It’s the most common type of license held by brokers because they are not as restrictive nor as expensive as other agencies.

Regulations in the United States

In the United States, binary options regulation is overseen by the Financial Industry Regulatory Authority, or FINRA.

FINRA largely operates as a complaint investigative service; if a dispute is brought forward from a party that believes to have been wronged by a broker or investor, FINRA does a full check of the legality of the transaction and advises on fault in the event that the dispute goes to court.

Regulations in the United Kingdom

The United Kingdom has been the cause of a lot of talk in the binary options world recently. Their own regulatory agency, the Financial Conduct Authority (or FCA), has been developing a new set of rules that binary options brokers and investors will have to follow.

These regulations are set to become official in the middle of 2016. Generally, U.K. brokers who are FCA regulated are considered the most trustworthy to invest with, simply because it’s difficult to earn an FCA license, especially in comparison to the typical Cyprus Securities and Exchange Commission license.

Regulations Around the World

There are several other regulatory agencies around the world, such as the Autorite des Marches Financiers in France, and the Commissione Nazionale per le Societa e la Borsa in Italy.

The Australian Securities and Investment Commission is widely considered to be one of the most proactive and protective regulatory agencies in the industry, but it appears the U.K. isn’t far behind.

For more information:

Source: SNc Special Features Dept

#regulations #binary options #trading

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