Binary Options Regulation

June 22, 2013 11:40 am

regulation_binary_optionsBinary options have been regulated for many years, but this financial instrument become rather popular quite recently – in 2008. This is the year when binary options were officially added as financial instruments by NADEX and CBOE. This was one of the most important moments in the history of binary options, because they became more accessible, better regulated, and more popular. These three changes turned binary options into an important part of exchange markets, and nowadays they generate billions of dollars of trading volume.

One of the main reasons for the popularity of binary options trading is the fact that they are easier to study and predict. This is due to the fact that when trading with regular financial instruments, you need to perfectly predict the price of the chosen stock. However, when trading with binary options, you only need to guess of the stock’s price will go up or down. Another huge difference between traditional financial instruments and binary options are the expiration times. Most of the financial instruments offered on the stock market, have an expiration time of days, weeks or months. Meanwhile, the strike time of binary options can be hours, days or even minutes.

We should also add that the newest regulations significantly improve binary options trading. For example, in the past, most traders took advantage of the services of Cyprus-based binary options brokers who had specific limits and expiration times that couldn’t be changed freely. Thankfully, since NADEX adopted binary options and accepted the CFTC’s regulations, you can trade in and out of binary options. This gives you a lot of freedom and makes binary options a more convenient and flexible financial instrument.

Current Market Regulatory Requisites

Binary options trading websites have one significant advantage over other websites that offer traditional types of trading and financial instruments. You need to know that binary options brokers can be certified by regulatory bodies and financial auditory, but many of them prefer to be certified by either gaming regulatory bodies or licensing authorities who are responsible for fixed-odds betting. This may seem strange, but it is the truth, and many brokers take advantage of this opportunity to avoid some strict rules and provide their clients with more freedom.

Binary Options – Fixed-odds Betting

Another advantage of binary options brokers is that they enjoy lower taxes. The reason for this is that many regulatory bodies consider binary options trading as a type of financial betting. Basically, this is the truth, because when you trade binary options you have foxed odds and crystal clear risk factors and final results. Finally, your winning are entirely based on the money you traded, so it shouldn’t come as a surprise that regulatory bodies like the Alderney and LGA classify binary options trading websites as betting websites.

Binary Options – Financial Regulatory Snapshot

If you review several binary options brokers, you’ll see a tendency that isn’t surprising – most of them will be licensed by CYSEC or another Cyprus-based regulatory body. The main reason for this is that most binary options brokers are registered in Cyprus due to the comfortable taxes in the area, and the fact that the regulations set by these authorities aren’t very strict. Of course, there are also brokers who operate with licensed from MAS, AFSL or the FSA.
One of the strangest things about binary options brokers is that in some countries they don’t need a license to operate.

Brokers registered in Turkey or Israel can operate with the necessary licenses, but this doesn’t seem to be a problem, because they manage to satisfy the needs of their customers. Binary options trading is quickly gathering pace in these countries, so it won’t be a surprise, if soon we see binary options brokers being regulated there as well.

The Benefits of Having Regulation

Being regulated wouldn’t have been necessary if there weren’t so many small-time brokers who try to scam their customers. This means that legit brokers need to pay a lot of money in legal fees in order to get the necessary documentation and meet certain requirements. Clients always feel more secure when trading with regulated and licensed brokers, because they know that their money is in a safe place.

Where to Trade

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