Being such a profitable and lucrative industry, binary options trading has attracted a large number of people from across the world. This type of trading is easy and quick. In addition, you can make use of automated trading software systems and mobile applications to enhance your profits.
But over the past years, the industry has witnessed the emergence of fraudulent binary options companies. These brokers do not offer anything good traders, but try to scam them and take away their money. the worst part is that they are so prevalent in the market today that it is hard to distinguish the good ones from the bad ones.
There are some countries in which there are no laws for binary options trading. However, there are certain authorities and bodies that regulate binary options trading. Traders who are regulated, meaning those who have obtained licenses from these financial authority bodies are generally safe and reliable. They have to follow certain codes and act in accordance with the laws when it comes to serving their clients. Traders must always go with regulated binary options brokers.
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Binary options regulations have been developed to protect traders from becoming victims of scams. When a broker has rules and regulations to follow, they will not try to deceive their clients or engage in any form of malpractice. Regulators have made the work of traders a little easier as they can help them choose the right broker for their trading needs. So let’s take a look at some of these regulatory authorities.
Regulation in the EU
CySEC or Cyprus Securities and Exchange Commission is the name of the body that regulates brokers in the European Union. CySEC is a competent authority that observes, controls and supervises binary options brokers. Aside from the broker, all the employees are also required to fulfil the commission’s requisitions. They have laid out specific rules for brokers, especially regarding bonuses and withdrawals. The authority has noticed that many brokers hide their terms and conditions about their withdrawals and acceptance of bonuses.
Therefore, they have mandated that brokers outline the terms and conditions of accepting bonuses clearly on their website. This is to make sure that traders have a better trading experience. Brokers are required to follow the procedures necessary to ensure that their terms and conditions are transparent. Those brokers who fail to meet the expectations and requirements of CySEC can risk losing their licenses or face penalties and fines.
Regulations in Canada
In Canada, there are no registered brokers as of May 2015. Previously, there were two bodies that undertook the task of monitoring binary options trading in Canada. These were Canada Securities Administrators Agency (CSA) and Investment Industry Regulatory Organization of Canada (IIROC). Binary options are regarded as exotic options and they are not illegal. But this country is still not popular when it comes to binary options trading because of the fact that each of the different territories and provinces has their own legislations.
Regulations in the British Virgin Islands
Binary options trading in British Virgin Islands is regulated by the FSC which is also known as the Financial Services Commission. This regulatory authority is more popular with brokers who deal in forex trading.
Regulations in France
In France, there are two financial regulatory authorities that oversees the financial markets in the country. These include Autorite des Marches Financiers (AMF) and Banque de France. However, it is quite unfortunate that although there are two bodies, the trading industry is not properly regulated. It isn’t illegal to trade in the country, but it is important that the residents trade with brokers that are registered in the EU.
Regulations in Italy
The regulatory authority in Italy is called CONSOB. The body is responsible for ensuring appropriate behaviour and transparency of brokers. There are strict rules in place and anyone who is found to breach the laws will have to pay a fine that could be as high as €500,000. CONSOB also reviews all licences that are given by authorities like AMF and CySEC. This is because brokers who hold licenses to operate in the EU can offer services in any country, except Italy. This is why it is the duty of CONSOB to review their licenses and approve them to do business in Italy only if they meet their requirements.
Regulations in New Zealand
Binary options trading is regulated in New Zealand by Financial Markets Authority (FMA). Brokers that are based in New Zealand must first register with the FMA. It is mandatory that have a physical office in the country. Their staff must also be in the country. It is also required that the broker keeps the company funds and the client funds in segregated accounts. Brokers who operate without a license are blacklisted in the country.
Regulations in the UK
In the UK, the binary options trading industry has undergone some changes. From 2015, the market was put under the regulation of FCA. The Financial Conduct Authority is a body that licenses brokers operating in the UK. It is possible for traders to do business with brokers that are licensed by other European regulatory authority. But changes may take place in the near future and the United Kingdom may also bring in laws like Italy.
Regulations in Vanuatu
The Vanuatu Financial Services Commission regulates brokers who offer services to the residents of the country. When compared with other regulatory bodies around the world, Vanuatu’s requires low initial capital and it has low tax rates as well. Broker may or may not have a physical address in the country to obtain licenses.
Regulations in Belize
Belize is a very popular country when it comes to binary options trading. Brokers who serve in this country are regulated by the International Financial Services Commission. Belize has a very reputable business environment because it has passed laws that prevent money laundering and deals with offshore banking in an appropriate manner.
Brokers must first register their company in Belize to obtain a license from the regulatory body.
Regulations in Japan
The Financial Futures Association of Japan (FFAJ) provides licenses to brokers operating in the country. They have a set of strict rules that every regulated broker must follow. When it comes to trading binary options in Japan, the procedure is a bit different from what is practiced around the world. The lowest expiry time is two hours. Similarly, there are different rules for bonuses and affiliate advertising that apply to brokers.
Regulations in Spain
Binary options brokers in the country are regulated by CNMV which is also known as the National Securities Market Commission. Spain falls under the EU and this is the reason its residents can do business with any broker that is licensed in the EU. It is not clear whether CNMV plays any role when it comes to blacklisting or fining brokers that operate illegally in the country.
Regulations in Israel
As of March 2016, binary options trading has been banned in Israel. But it is not clear whether the residents can or cannot trade with offshore brokers.
Regulations in Russia
One of the countries where binary options trading is hugely popular is Russia. In fact, a large number of brokers serve the Russian markets. The body that is responsible for regulating brokers in the country is the Russian Central Bank (CBR). There are strict rules for offering financial services in the country. For example, if a broker wants to offer forex trading and binary options trading, they must acquire two different licenses for these two types of trading.