Best Binary Broker 2020!
Perfect for Beginners!
Free Trading Education! Free Demo Acc!
Get Your Sign-up Bonus Now:
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.
Best Binary Broker 2020!
Perfect for Beginners!
Free Trading Education! Free Demo Acc!
Get Your Sign-up Bonus Now:
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.
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.
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.
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.
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 is one of the fastest growing Binary Options market. However, South Africa is the only area, where Binary Options trading is fully allowed.
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.
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.
Best Binary Broker 2020!
Perfect for Beginners!
Free Trading Education! Free Demo Acc!
Get Your Sign-up Bonus Now: