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It’s Been A Busy Year For Binary Options Regulators
Binary options regulators have had a busy year; warnings, new regulators, expanding US markets and more. Are you up to date with the latest new? Read on to be sure!
Regulators Are Stepping Up Their Game
It has been a busy year for binary options regulators. Not only have we seen an upsurge in warnings there are new regulators on the scene with expanded focus and, in some cases, increased cooperation. This is at once a good and bad thing for binary options and traders like us. On the one hand the industry is getting safer. Your deposits as well as your profits are more protected than ever; segregated accounts and third party oversight account for that. On the other it means that some jurisdictions are clamping down on trading in general, making it harder for some of us to access the best platforms and brokers, or any brokers at all.
Warnings Just Don’t Stop
The litany of warnings we saw in 2020 did not end with the start of the new year. Regulators from CySEC through Quebec’s AMF, New Zealand’s FMA and the UK’s FCA have upped the ante adding new and old brokers alike to their respective lists. France’s famed Binary Options Blacklist now has more than 250 names on it. The thing to remember about each of these warning lists are that they are location specific, as in, they really only pertain to the exact jurisdiction from which it was issued. Quebec’s list is a prime example; many of the names on the list are well known and respected brokers, just in other countries. Many of them are in fact CySEC regulated. The complaint, they are not regulated in Canada, is an echoe of what other regulators are saying; these brokers are not regulated to operate here.
Other infractions that regulators are responding to are aggressive marketing tactics, cloning and false claims of regulation. Marketing tactics include high pressure sales pitches along with guaranteed trading tips and broker managed accounts, the first pushes clients into investments before they understand their true nature, the second two presenting serious conflicts of interest. Cloning is another practice regulators find misleads traders; it is when a shady broker uses a name like JPMBinary Options to imply it is associated with the international investment bank JP Morgan. The most serious infractions though are when brokers claims to be regulated when in fact they are not, or claims to be regulated by shadow regulators created solely for the sake of misleading the public.
The US CFTC is also getting on board. The regulator launced a new website in 2020 to help spread the word. The website hosts what they call the “RED” list, an acronym for regulation defecient, a list of all binary options brokers that illegally solicit clients in the US. Remember, in the US it is against the law for unregistered brokers to advertise to and solicit clients but not against the law for citizens to join a broker and trade, a gray area of regulation and source of much confusion. I applaud their effort but must say it falls far short of the mark. As of last check there were only 19 brokers listed, all of which have flown so low under the radar it’s likely you’ve never heard of them.
In addition to the RED list another US regulator has recently joined the regulatory fray, issuing warnings of its own. The FINRA, Financial Industry Regulatory Authority, says that binary options are all to often a fraud, something we’ve known for quite some time. The interesting thing about the warning is that FINRA accepts binary options trading, the point is to caution investors about the risk, and the chances for fraud. The urge US traders to be wary of off-shore providers, not to avoid them, implying their acceptance of the burgeoning international trade.
Officially Unofficial Update : SpotOption Brokers No Longer Accept US Traders
You may have already noticed but SpotOption powered brokers accepting US traders have been closing their doors. This trend came to a head over the summer as the last of them finally quit accepting them. When asked for a response the reply I received, from Dorin Satrin, only said “SpotOption is a technology provider and not a trading website”. Regardless, a message received from CherryTrade clearly stated they were closing their doors due to compliance with SpotOption. The move is likely in preparation for SpotOptions CFTC approved mass launch into the US market slated for the near future. SpotOption, as well as TechFinancials and Tradologic, have been working closely with Cantor Exchange to create trading platforms to interface on Cantor’s exchange style trading platform. SpotOption trading is already available on the Cantor Exchange trading website, more brokers are expected to follow in the 4 th quarter of 2020 or early 2020.
Increased Cooperation And An International Man Hunt
Regulators are beginning to cooperate more, especially in the EU. Agencies in member countries are now accepting registration of binary options brokers regulated by CySEC. CySEC regulation was the first and most prominent regulatory body, undertaking the task in 2020, but its jurisdiction has been heavily questioned. Under the EU’s financial charter, MiFID and financial passport a financial business regulated and registered in one country can do business in other member nations. The stipulation is that the businesses must register in each of those nations as required. The catch is that not all EU nations were willing to accept to binary options as financial tools, and some did not even take notice until recently. Now, following a land mark case in the Dutch courts earlier this year, more and more nations are accepting registrations from regulated brokers and further cementing CySEC’s role as top watchdog in Europe.
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If simply regulating brokers was not enough, regulators in the UK are still on a manhunt begun earlier in the year. Clint Canning, CEO of FXWorld and BASE2TRADE, fled the country following allegations of fraud. The company’s, one a forex managed account brokerage, the other a binay options trading website, took in millions of investor dollars, all of which have since dissappeared. Several FXWorld employees, including Canning and trader Gary Andrews, had already been suspended from Rabobank for forex fraud and price fixing. Not only were traders fleeced of their funds, nearly a dozen employee’s not connected to the frauds were left out in the cold. Canning is suspected of residing in Dubai and has yet to apprehended by police.
Binary Options Regulation – Everything You Need to Know
I’ve decided to open another series of articles with an article about regulation matters, not because I think it’s the most important thing a trader should look for in a broker (and it’s not), but because I think that’s the most discussed issue by most binary options traders. Update: Now, three years after I first wrote this article, regulation has become a very important part of each trader’s process of choosing a broker. One of the first questions a new trader asks is whether the broker is regulated or not and if Yes, then by whom. The industry has transformed a lot since 2020 and I am glad to see that traders are a lot more careful with their money and pay attention to the companies they are doing business with.
Potential traders from all around the globe are beginning to understand the fine benefits of Binary Options, but somehow the whole binary options industry still seems quite blur for most people. The increasing growth of binary options brokers is defiantly not synchronized with the amounts of information given by these brokers about their product. Therefore, it’s not a big surprise to see so many confused people just longing for some clear information, for something to hold on before depositing their hard earned money. From my experience, all these worries and lack of information leads to one simple phrase pronounced by these fuzzy traders: “Binary Options Regulation”.
Regulation is an advantage, not a must. Just take a look at the small and un-important Forex industry (hope you all realize I use cynical, those of you who don’t know the Forex industry should do some learning before beginning with Binary Options…). The biggest Forex brokers are now valued by billions, but at the beginning, they weren’t so different from today’s binary options brokers. It’s important and advised to be suspicious towards new trends, but be reminded that sometimes pointing your finger at the right trend at the right time could make you great profits. It took quite some time before the Forex industry became fully regulated, similarly, it will take more time for the binary options industry to claim full regulation. In today’s market, traders could find a few already regulated Binary options brokers (or on process), our readers could find most of these brokers on our trusted binary options brokers list.
Update (November 2020): As I was saying three years ago, more time needs to pass until the binary options industry will become fully regulated, like the Forex industry (an unregulated Forex broker is a rare bird these days). But the industry has made significant advances and most brokers are looking to get a license from one of the main regulators across the globe. And speaking of that, the main player is now the Cyprus Securities and Exchange Commission (CySEC); their increased activity is due to the fact that most binary options brokers choose to operate out of Cyprus, so they have to get regulated by a Cypriot authority. You can read this in-depth and recently updated article about CySEC Regulation but keep in mind that other regulatory agencies are stepping in and start paying more attention to the binary options industry. The British Financial Conduct Authority (FCA) recently took some steps towards regulating binary options in the United Kingdom (Article coming soon), but also other regulatory agencies around the world are doing the same. However, I believe the best thing is that brokers now want to become regulated and this is mostly because traders demand to invest with licensed firms. In other words, unregulated brokers will soon start to lose clients who will close their accounts and join regulated companies. To keep you informed about regulation around the world we’ve recently added all regulators information which will also show you how to file an official complaint against your brokerage in case of misconduct.
Why do we Need Regulation in Binary Options?
First, for those of us who have absolutely no idea what’s regulation is all about: if a company is regulated or not regulated, it doesn’t mean it conducts legal business or illegal business if not regulated. So why regulate at all? For several reasons. First, despite the free markets liberal overlook, markets and economies can’t function properly without a basic set of rules to ensure physical rights, underpin transactions, and antitrust laws for safeguard fair competition. Rules and regulations carry the weight of law but are not written by lawmakers. Instead, they’re issued mostly by bureaucrats who rely on information and advice from experts to form the basis of the new standard. Therefore, the main reason behind regulation is to ensure 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.
Second. In many cases, rules and regulations are implemented because some people have forgotten the fair business rules and now the rest must pay the price. The rules are essential requirements to ensure the safety of those directly involved plus the greater good of all related population. Regulation is necessary to mitigate broader market failures in competitive industries. For us as clients, regulation is needed to ensure the protection of consumers from abuse, to introduce and maintain safety standards, and to protect individuals from scams and frauds. In a perfect world, laws, rules, and regulations ensure a better product or service, better distribution, safer environment and, in general, better guidelines with which to move forward to progress.
Regulation and Binary Options
The field of Binary Options is relatively breached, both since it’s quite fresh and the different definitions of binary options trading in different countries. In the U.K. for example, Binary Options falls into the “gaming” category (however, new FCA sets of rules will be soon implemented and by mid-2020 binary options are likely to be officially considered “financial instruments” – article coming soon) while in other countries Binary options trading is “gambling”. Same goes to Forex, before regulation. The reason for that is that different states have different definitions, legal definitions, for the same industry. That’s why Binary Options is not available in all countries. In the U.S, which is stricter than other countries when it comes to people’s money, not all assets are available to trade. Some brokers don’t even allow U.S traders to deposit. On the other hand, both Europe and the U.K do allow all traders to trade all assets. Asian markets are even less strict.
The first countries to issue legal statues to Binary Options platforms and Brokers where, as always, the tax shelters countries: BVI and Cyprus. Many internet gambling and trading website companies are located in those countries, mostly in Cyprus due to its physical and legal linkage to Europe. That’s the reason why most Binary Options brokers are also located in those countries, and of course, the low to zero taxes. Moreover, most regulation processed in Cyprus effects European citizens also. The Cypriot regulators have already begun processing binary options brokers appeals to regulation, inside information told me that it’s only a matter of a couple of months before the first brokers would be officially regulated by the Cypriot regulators. *Update: Now after more than three years, we can safely say the CySEC is the main regulator of the binary options industry and that other regulators across the globe are also working towards a safer trading environment. Some of the most important authorities are the Italian Commissione Nazionale per le Società e la Borsa (CONSOB) and the French Autorité des Marchés Financiers (AMF) but of course, others are starting to participate actively. As for the U.S. – it’ll take time, but some steps are being taken by the Financial Industry Regulatory Authority (FINRA). E.U regulation is only good for Europe, regulated brokers would have problems working with American customers. Hopefully, the U.S. would follow the European footsteps soon, so that trading will be safer and available to anyone. We’re working on a comprehensive guide to U.S. regulation so stay tuned if you want to know how Binary Options are evolving and changing in order to enter the U.S. market through the front door.
When a broker is not regulated, it doesn’t mean it’s a scam! The main reason why regulation is an advantage (and of course should be the main goal of the binary options industry in the end) is that when a broker is regulated it means the deposited money in kept in a safe account and monitored by a third party to ensure fair-play. Since the Binary Options industry is quite fresh (the first brokers only opened for business on 2008), most brokers don’t have the longed regulation. Nowadays, we can see many countries, From Northern America to the Far East and Australia and back to Europe, begin to understand the risks for the growing number of traders and benefits for their own economy and therefore be allowing slowly but with caution some regulation. The way I see it, Australia is currently the most advanced country in terms of regulation, but sadly those regulations do not apply in the US also, for example.
Each and every country have their own laws and restrictions, for example, many tax shelter countries with an increasing economic growth (especially in the financial markets) such as Cyprus or the British Virgin Islands are now allowing regulation for some binary options brokers under their own restrictions which also applies to other countries.
Full regulation all around the world still has some way to go, meanwhile, we advise our readers to stick with the popular under regulation or on process binary options brokers since they’re considered by most experts as safer and better-trusted brokers.
Regulators Across the Globe
Many of you are familiar with the Cyprus Securities and Exchange Commission (CySEC), mostly because the majority of binary options brokers are located in Cyprus and thus, regulated by CySEC. A broker located in the United Kingdom has to become regulated by a British authority, one located in Australia looks for regulation from an Australian regulator and so on. Some brokers even look for multiple regulations (i.e.: they are from Cyprus but want to operate in the UK so they get regulation from a British watchdog) but we cannot take their word for it and we have to be able to check if they are really regulated. For that, we need to know how to contact the regulators and how to complain in case of misconduct from the part of our broker. So, let’s meet the main regulatory agencies around the world:
Cyprus: Cyprus Securities and Exchange Commission (CySEC). We start with the CySEC because it’s the most active watchdog for the binary options industry. A lot of brokers choose to get regulated by the CySEC because it’s relatively cheap and the conditions are not as severe or restrictive as with other regulators. Some argue that the CySEC goes too easy on brokers that misbehave but warnings and fines have been issued, which shows they are doing their job. Sometimes they should step in more decisively but that’s just an opinion and overall, trading with a CySEC regulated broker is better than with an unregulated one. For more info about CYSEC, we recommend reading this CySec Binary Options Regulation article and if you have to file a complaint, follow this link. If compensation is sought, you are advised to submit your complaint to the Financial Ombudsman of the Republic of Cyprus.
United Kingdom: Financial Conduct Authority (FCA). This is one of the more “feared” regulators and their conditions are a lot tougher than CySEC’s. A binary options broker regulated by the FCA offers a higher degree of trust and is generally regarded as the safer choice, mostly because it’s harder to receive an FCA license and most brokers go for the easier option (CySEC). We’ve recently added a full article about the Binary Options FCA Regulation and we invite you to read it for more complex information. To learn how to file a complaint with the FCA, follow this link. If you are still not happy with the way the issue was handled, contact the British Financial Ombudsman Service and file a complaint with them as well.
United States: Financial Industry Regulatory Authority (FINRA). Through its Complaint Program, FINRA investigates the activity of brokerages and is empowered to take action against them, including fines and suspensions. FINRA operates one of the largest dispute resolution forums in the industry and assists in the resolution of problems that may arise between investors and brokerage firms. To file a complaint with the FINRA, use this link and to check your broker’s license or certification, use their BrokerCheck tool available here. If you are a senior investor and have concerns about your brokerage or investment, you’ll be happy to hear that recently FINRA have set up a Help Line for Seniors – HELPS. A toll free number is listed and further information about how to proceed so make sure you follow the link above. Other U.S. watchdogs include the Securities and Exchange Commission (SEC), the US Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA). There’s a lot to say CFTC, so visit this CFTC Binary Options review.
France: Autorité des Marchés Financiers (AMF). The French watchdog ensures the protection of investors and the proper functioning of the financial markets so if you are having a problem with your financial intermediary, make sure you contact the AMF Ombudsman’s Office. Another authority you can turn to is the Banque de France ACPR so make sure you contact them as well if your problem is not solved.
We will continue with a list of links to other regulatory authorities from different parts of the world:
Complain, Don’t Let them Get Away With It!
We’ve given you the map but you have to do the work. Now you know where to complain, but you need to fill all forms and send all the required documents. Go to the respective regulators’ websites using the links above and explain the issue with as much detail as possible. Also, note that most brokerages keep records of your trades, emails and phone conversations so make sure what you are claiming is true and that you can prove it. You can be involved in several scenarios:
1: If your brokerage is using aggressive sales tactics, make sure you record a few of the conversations (or take screenshots of your emails) before contacting the regulatory authority. During the conversations, explain in a clear manner to the broker’s representative that you are not interested in the service they are offering. Warn them that you are going to complain to the authorities if they don’t stop bothering you.
2: If you are not able to withdraw or you have been scammed, gather all proof of this before contacting the regulators. Make sure the required identification documents are sent to your brokerage (in conformity with Anti-Money Laundering procedures) and that you are not in breach of the brokerage’s Terms and Conditions. If you haven’t read the T&Cs and agreed blindly, the regulatory body will not be able to help you much, unless the T&Cs are illegal according to local laws.
3: If Bonus problems arise and your investment money is tied to the brokerage until a certain trading volume is reached, first inform the brokerage of CySEC’s circular CI144-2020-02. That document makes it clear that an investor can withdraw the initial investment (not the bonus) but if you are dealing with a broker that is not regulated by CySEC you will need to contact their respective regulatory agency and file a complaint.
4: If your account manager performed trades on your account without being instructed to do so in writing, you need to gather all proof and present it to the authority that regulates their activity. This is a grave breech of your privacy and means the brokerage/account manager has access to your password and consequently to your money. In some countries, it’s illegal for individuals to even offer investment advice if they don’t have the required certifications (Investment Advisor/Consultant), so investing your money directly, without your approval is an even greater issue, which can attract serious legal action.
5: If you can’t get a hold of your broker, make sure you’ve tried all the possible ways and only then contact the regulatory authority, inquiring about the status of the brokerage. Firms have to stay in constant communications with their regulators (procedures differ depending on the regulatory agency) so the watchdog will be able to shine some light on the situation. If not, at least they will have a better chance than you to get a hold of the brokerage.
6: If the brokerage is manipulating price, you need to record your trading platform using screen capture software (preferably video). You should be able to prove everything you claim, so as soon as you start suspecting that quotes are manipulated, start gathering all sorts of evidence and only then contact the regulatory agency.
Regulation = More Chances of Getting your Money Back
There could be other scenarios but they all have the same guidelines: gather all the evidence you can, back up everything you say and explain in detail the situation to the regulatory authority. Maybe I don’t need to say it but do not swear and please use formal tone. Regulators are there to help but they are not your beer buddies, so act accordingly. Everything I’ve talked above applies to a regulated brokerage. It’s your job to check if the brokerage you want to invest with is regulated by a major authority but this shouldn’t be too hard because usually, brokerages make it easy for their clients to find out if they are regulated. In other words, you will find a “Regulation” tab on the broker’s website, where they display all the agencies that regulate their activity. However, if you’ve fallen in a non-regulated broker scam, your best chances are to contact your bank and credit card provider and ask for a chargeback or any other way of getting your money back. Of course, we strongly recommend investing only with regulated brokerages because as you can see, you have a plethora of methods to get your money back and to have your problem solved.
Improving Trading Results; Get Ready For A New Year
The new year is an opportunity to improve your binary option trading results; review and revise are operative words. Read on for tips on how to increase yours!
Prepping For Binary Options Profits
2020 has just come to an end and whether you are net profitable for the year or not it is time to get ready for the 2020. Believe it or not your preparations for the coming year are the most significant thing you can do to improve your results. Of course, you still have to focus on your education, tracking the markets and making good trades but without a solid foundation to work from your efforts could be worse than meaningless. Trading is serious business and it takes a serious approach to be successful. Remember, those who don’t learn from their mistakes are doomed to commit them again, and again, and again.
- Review your broker and switch to a new one if needed. Choosing the right broker is on the front lines of your defense against scams, fraud and unnecessary losses but you can’t just trust them once you pick one. You have to ask yourself, are they still trustworthy? Have you had problems with withdrawals, misunderstandings about bonus terms or other? It is also important to keep track of changing terms, changes in regulatory status, ownership of the company as well as your overall satisfaction with them. The terms are where the greatest chances of changes occur, they can be altered at just about any time and may have an impact on withdrawals, bonus terms/turnover and trade sizes along with every other aspect of your account. This is especially true if the broker has received regulated status over the course of the year, or if it is bought out by another business, an event which has been happening a lot recently as the industry consolidates. Review this article about dealing with brokers: Binary Trader Protect Yourself. Our two most recommended brokers are MarketsWorld and IQOption.
- Track changes in regulation. Regulation of binary options has always been a tricky thing to nail down. On one side of the coin financial regulators don’t like to recognize binary as financial products, on the other what’s regulated in one country is not allowed in the next. In between those two extremes are a rapidly changing environment in which expanding regulation is making it easier for some to trade safely, and others to be completely shut out of the market. A change in regulation could do a number of things for you, not all of them good. You could find a newer, better, safer broker available to you or you could find the safe broker you were using banned in your area. Keeping ahead of any changes will greatly enhance your experience and satisfaction but remember, just because a broker is getting warnings from one jurisdiction does not mean they are bad, it just means they aren’t regulated by the agency issuing the warning. This article recaps some changes made in 2020 “It’s Been A Busy Year For Binary Options Regulators.”
- Trader, Know Thyself! Now it’s time to look at your own trading, your strategy and system. The first question you must ask is this, have you been following the rules? Every strategy and system and comes with its own rules that must be followed for constructive changes to be made. If you haven’t been then that is the first thing you need to do, commit to following rules. Random, wild trading will only result in net losses, even if you strike it rich on a lucky trade or two. If you have been experiencing a lot of losses this could be the reason why, and if it isn’t, you won’t know because you haven’t been following rules. Personally, the thing that helps me follow my own rules is by posting my trades and ideas for others to see. Once you learn to relay on your rules I think you will find it makes trading easier, and helps to reduce the effects of fear and greed. I’ve learned that by sticking to my rules I can forget about the open trades, if they win or lose, and focus on the next trade set up. You can read this article for more on trader psychology, “Trading Psychology, Discipline And The Importance Of Overall Balance”
- Strategy review. The final step is to review your strategy, assuming of course that you have indeed been using one and following the rules. It’s OK if you’re rules are simple, or if your results aren’t that great because this is the time to make improvements. Look back over your past trades, try to identify which were the best and why. Also, which were the worst and why? Use this knowledge to adjust and improve your rules so that you can weed out more of the weak or false signals and target more of the strong signals. If you haven’t been keeping track of your trades in a meaningful way this is the time to start. I like to keep track of all my trades, two articles that can help are, “So, You Want To Be A Better Trader” and “Tips For Choosing Binary Options Expiry”.
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