Binary Options Regulations

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Trading Regulations

History of Regulated Options

Although investing in binary options can be both entertaining and profitable, binary options brokerages were largely unregulated in the past. This allowed unscrupulous operators and downright scam-artists to wreak havoc on the industry. Fortunately, reputable regulation bodies have begun to protect consumers.

European Regulators

The Cyprus Securities Exchange Commission (CySEC) is leading the way in creating a safe framework that allows binary options investors and honest binary options brokers to conduct business in a regulated environment.

Licensing of binary options brokerages by EU securities commissions such as the FCA, AMF, CONSOB, BaFin, FMA and FSMA is also gaining momentum, drawing reputable binary options brokerages into their deserved place in the mainstream financial services industry.

CySEC, however, remains the leader in the regulation of binary options trading and CySEC membership can be regarded as the gold standard that ensures well-regulated binary options trading in the EU. Binary options investors are gaining increased confidence as they can be secure in the knowledge that their investments are safely and professionally handled and that in the rare event that they are not, recourse is available.

How A Regulated Option Works

A fixed return is offered to investors based on specific outcomes. If the outcome is achieved, the investor receives a fixed cash or asset return on their investment, if not, the initial investment is forfeited.

For example, an investor may make an investment based on the valuation of a currency. He or she may specify whether the exchange rate will be above or below a certain level on a fixed maturity date. Supposing that an investor bases the investment on an increase in the EUR/USD exchange rate. If, on the date of maturity, the rate is indeed higher than the specified value, the broker pays the investor based on the pre-determined percentage of investment pay out. If it closes lower, the investor forfeits his or her initial investment.

Because of its relatively short term investment duration, binary options trading was initially regarded as a form of gambling in many countries, but its recognition as a bona fide financial service is evidenced by CySEC’s recognition of binary options as financial instruments. Malta later followed suit, moving binary options brokerage regulation to its financial services authority rather than its gambling board.

Early Regulation Of Digital Options

In the early days of binary options trading, funds were not held in trust accounts and no outside regulator monitored them or ensured that transactions were fairly conducted. In 2020, CySEC announced that binary options would be considered as financial instruments and would be regulated accordingly. All Cyprus based binary options brokers were required to register their operations within 6 months of the May 2020 announcement.

In 2020, CySEC began to take decisive action against any brokerages in Cyprus that had not yet registered. They suspended the licenses of binary options brokers who failed to comply with codes of financial best practice. Hefty financial penalties were exacted from certain binary options brokerages. These measures served to emphasise that CySEC are serious about the regulation of binary options brokers in Cyprus. The steps dealt a decisive blow against those who hoped to operate ‘under the radar’.

Regulatory Enforcement

Today, CySEC closely controls Cyprus based regulated binary options brokers, ensuring that regulations are adhered to. They will also levy penalties, issue warnings and withdraw licenses, if and when binary options brokers are found to be in contravention of the relevant legislation. However, their initial 2020 crackdown was sufficient to make traders aware that contraventions would not be tolerated.

CySEC also welcomes public input . It deals with complaints against its members dealing with market abuse and financial crime in accordance with current legislation. Complainants need not be citizens of Cyprus. However, CySEC only has authority over purveyors of financial instruments such as binary options who are based in Cyprus. They may though, be able to issue warnings to investors regarding purveyors of financial instruments elsewhere in the world.

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Trading In The US

Although investment in binary options is popular in the EU, it continues to be a grey area in the US. At time of writing, binary options (termed ‘Fixed Return Options’ in the US) are only legally available to those who purchase them using the American Stock Exchange, CBOE and Nadex. It is not legal for US citizens to purchase binary options from any other source.

The US Securities and Exchange Commission has laid charges against binary options brokers for illegal sales to US investors. The current stance in the US is already considerably more lenient than it initially was, and it is to be assumed that in the future, they will follow the EU in recognising Binary Options as bona fide financial instruments regardless of their source.

Is My Broker Regulated?

Although other countries are beginning to react to the need for regulation in the binary options industry, the regulatory framework and enforcement of regulations is most stringent in Cyprus where the move towards regulation was first initiated.

CySEC membership is the surest indicator of a service provider that is monitored by an outside agency. They must maintain client funds in trust accounts, and have sufficient operating capital. They are also expected to deal with clients equitably, fairly and in accordance with regulations. Our brokers comparison table, and reviews, include a ‘regulated’ flag, clearly identifying brokers who are CySEC registered.

Who regulates binary options in the UK?

Conclusions on binary option regulation

Prior to 2020, binary options trading was unregulated and abuses occurred. Today, most binary options brokers comply with legislation related to the handling of financial services. CySEC membership ensures the most comprehensive regulation of binary options trading available and allows investors to earn excellent returns on intelligent binary options choices.

Regulatory Information

Binary.com is a licensed and regulated trading platform that serves over 1,000,000 customers globally. We hold multiple licenses to comply with regulations around the world. Since 1999, we’ve served our clients with a constant and unwavering commitment to integrity and reliability. We always hold ourselves to the highest ethical standards, in addition to our regulatory requirements.

Binary Limited

Binary Limited, with registered office at 47 Esplanade, St Helier, Jersey JE1 0BD, Channel Islands, is the holding company for the subsidiaries listed below.

Binary Investments (Europe) Ltd

Binary Investments (Europe) Ltd, W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta. Licensed and regulated as a Category 3 Investment Services provider by the Malta Financial Services Authority (licence no. IS/70156).

European Union residents who wish to trade investment products will have their accounts opened with Binary Investments (Europe) Ltd.

EU Passport Rights

Binary Investments (Europe) Limited is entitled to provide services in another EU Member State through EU passporting rights. Refer to the map below for the list of EU countries that have access to Binary.com via EU passporting rights – freedom to provide cross border services.

Pillar 3 Disclosures

The Pillar 3 disclosure report of Binary Investments (Europe) Limited has been prepared in accordance with the Capital Requirements Directive IV and the Capital Requirements Regulation. Read our Pillar 3 disclosure report to understand how we comply with market discipline as a market participant.

Key Information Documents

These documents provide you with key information about our investment products. This information is required by law to help you understand the nature, risks, costs, potential gains and losses of these products and to help you compare them with other products.

RTS 28

RTS 27 2020

Q1 2020

Q2 2020

Q3 2020

Q4 2020

RTS 27 2020

Q3 2020

Q4 2020

Binary (Europe) Limited

Binary (Europe) Limited, W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta. Licensed and regulated (for gambling products only – Binary.com’s Synthetic Indices) by the Malta Gaming Authority in Malta (licence no. MGA/B2C/102/2000) – view licence and also maintains an Irish licence. For UK clients by the UK Gambling Commission – view licence.

European Union residents who wish to trade gambling products will have their accounts opened with Binary (Europe) Limited.

Regulator:

Binary (IOM) Limited

Binary (IOM) Limited, First Floor, Millennium House, Victoria Road, Douglas, Isle of Man, IM2 4RW. Licensed and regulated by the Gambling Supervision Commission in the Isle of Man (current online gambling licence granted on the 31 August 2020) – view licence and for UK clients by the UK Gambling Commission – view licence.

UK and Manx residents who wish to trade gambling products will have their accounts opened with Binary (IOM) Limited.

Regulator:

Binary (SVG) LLC

Binary (SVG) LLC, Hinds Buildings, Kingstown, St. Vincent and the Grenadines; company number 25299 BC 2020.

Clients from the rest of the world (excluding certain countries such as the USA, Canada, and Hong Kong) will have their account opened with Binary (SVG) LLC.

Binary (V) Ltd

Binary (V) Ltd, Govant Building, Port Vila, PO Box 1276, Vanuatu, Republic of Vanuatu. Licensed and regulated by the Vanuatu Financial Services Commission – view licence.

Clients from the rest of the world (excluding certain countries such as the USA, Canada, Hong Kong) will have their FX and CFD Metatrader 5 account opened with Binary (V) Ltd. Binary.com is not available in the Republic of Vanuatu.

Regulator:

Binary (BVI) Ltd

Binary (BVI) Ltd, Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands. Licensed and regulated by the British Virgin Islands Financial Services Commission – view licence.

Clients from the rest of the world (excluding certain countries such as the USA, Canada, Hong Kong) will have their FX and CFD Metatrader 5 account opened with Binary (BVI) Ltd. Binary.com is not available in the British Virgin Islands.

Regulator:

Binary (FX) Ltd

Binary (FX) Ltd., Lot No. F16, First Floor, Paragon Labuan, Jalan Tun Mustapha, 87000 Federal Territory of Labuan, Malaysia. Licensed and regulated by the Labuan Financial Services Authority to carry on a money-broking business (licence no. MB/18/0024).

Clients from the rest of the world (excluding certain jurisdictions such as the USA, Canada, Japan, and the European Union) who wish to trade CFDs will have their MetaTrader 5 account opened with Binary (FX) Ltd. Binary.com is not available in Malaysia.

Regulator:

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In the EU, financial products are offered by Binary Investments (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta, regulated as a Category 3 Investment Services provider by the Malta Financial Services Authority (licence no. IS/70156).

Outside the EU, financial products are offered by Binary (SVG) LLC, Hinds Building, Kingstown, St. Vincent and the Grenadines; Binary (V) Ltd, Govant Building, Port Vila, PO Box 1276, Vanuatu, regulated by the Vanuatu Financial Services Commission (view licence); Binary (BVI) Ltd, Kingston Chambers, P.O. Box 173, Road Town, Tortola, British Virgin Islands, regulated by the British Virgin Islands Financial Services Commission (licence no. SIBA/L/18/1114); and Binary (FX) Ltd., Lot No. F16, First Floor, Paragon Labuan, Jalan Tun Mustapha, 87000 Labuan, Malaysia, regulated by the Labuan Financial Services Authority to carry on a money-broking business (licence no. MB/18/0024).

This website’s services are not made available in certain countries such as the USA, Canada, Hong Kong, Japan, or to persons under age 18.

The products offered via this website include binary options, contracts for difference (“CFDs”) and other complex derivatives. Trading binary options may not be suitable for everyone. Trading CFDs carries a high level of risk since leverage can work both to your advantage and disadvantage. As a result, the products offered on this website may not be suitable for all investors because of the risk of losing all of your invested capital. You should never invest money that you cannot afford to lose, and never trade with borrowed money. Before trading in the complex products offered, please be sure to understand the risks involved and learn about Responsible Trading.

In the EU, financial products are offered by Binary Investments (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta, licensed and regulated as a Category 3 Investment Services provider by the Malta Financial Services Authority (licence no. IS/70156).

In the Isle of Man and the UK, Synthetic Indices are offered by Binary (IOM) Ltd., First Floor, Millennium House, Victoria Road, Douglas, IM2 4RW, Isle of Man, British Isles; licensed and regulated respectively by (1) the Gambling Supervision Commission in the Isle of Man (current licence issued on 31 August 2020) and by (2) the Gambling Commission in the UK (licence reference no: 39172).

In the rest of the EU, Synthetic Indices are offered by Binary (Europe) Ltd., W Business Centre, Level 3, Triq Dun Karm, Birkirkara, BKR 9033, Malta; licensed and regulated by (1) the Malta Gaming Authority in Malta (licence no. MGA/B2C/102/2000 issued on 01 August 2020), for UK clients by (2) the UK Gambling Commission (licence reference no: 39495), and for Irish clients by (3) the Revenue Commissioners in Ireland (Remote Bookmaker’s Licence no. 1010285 issued on 1 July 2020). View complete Regulatory Information.

Binary.com is an award-winning online trading provider that helps its clients to trade on financial markets through binary options and CFDs. Trading binary options and CFDs on Synthetic Indices is classified as a gambling activity. Remember that gambling can be addictive – please play responsibly. Learn more about Responsible Trading. Some products are not available in all countries. This website’s services are not made available in certain countries such as the USA, Canada, Hong Kong, or to persons under age 18.

Trading binary options may not be suitable for everyone, so please ensure that you fully understand the risks involved. Your losses can exceed your initial deposit and you do not own or have any interest in the underlying asset.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 78.6% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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:
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  • Binomo
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    2 place in the ranking!

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