27 March, AtoZForex, Lagos – Binary options regulation has been a hot topic lately across various jurisdictions. The most recent negative stance taken against the instrument is by the Israel Securities Authority (ISA), opting to ban Binary Options as a product for the Israeli brokers, where brokers are given a 30 day window before the restriction is fully activated. This is just the latest in a series of actions taken against the investment instrument, which is seen to involve heavy risk and reward.
Permanent conflict of interest?
A major challenge about binary options operations is the fact that it is a time bound product with the broker being on the other side of the trade all the time. Hence, making the conflict of interest so high that most brokers often fail to operate fairly. It operates such that the dealer offers a predetermined payout conditional on a certain financial instrument’s performance (could be a currency, an index, or a stock). Hence, if the bet fails to attain a predetermined condition, the initial investment staked is lost.
Israel bids binary options farewell
The Israeli regulator is just one of many financial watchdogs to take a tough stance against binary options activities. Binary options regulation clampdown started with a controversial decision by US regulators back in 2013 to limit operations of the instrument in the region. Ever since, a number of stiff penalties have been levied upon binary brokers found to be offering the product to US residents. A recent example is the sensational settlement sum of $11 million by Banc de Binary by the Securities and Exchange Commission (SEC), over allegations of signing up US investors to binary options trading.
The Banc de Binary case is an example of how multiple regulators can clamp down on a single firm. The CySEC regulated broker was previously hit with a €350,000 settlement fine, due to violation of the Cypriot regulator’s code of conduct. While the Financial Market Authority (FMA) of New Zealand has issued a stern public warning against “Banc De Binary.”
CySEC’s applaudable effort
Speaking of the Cypriot Securities and Exchange commission (CySEC), the financial regulator presently stands as one of the most notable regulators of the controversial instrument. The regulator however, has a good reason to do so, considering its stiff stance against broker malpractices, therefore forcing brokers to act accordingly to fair market practices if they are to continue operations across the European Union. The CySEC regulation of binary options serves as the region’s major support for the instrument across the continent.
Meanwhile we can expect the CySEC governing body to start getting more and more stricter on binary options regulation and issuing new Binary options licenses and putting those of White Label Binary options suppliers such as Banc de Binary, O-SYSTEMS, SpotOption, Hello Markets and others into strict regulatory standards, where many of such platform providers offer their white label Binary options platforms to unregulated entities. Some of these white label product providers offer these products under their own umbrella license.
One the other hand, it is worth mentioning about Cyprus is the fact that gambling is legal in the country. Even if the complete EU regulatory system decides to mark Binary Options as a non-financial product, Cyprus based Binary Options providers will not have to shut their doors but make adjustments to their operations.
Think we missed something? Let us know down in the comments section.