Obligatory New Zealand Binary Options licensing - why now?

New Zealand Binary Options licensing is now obligatory for the businesses providing short-duration derivatives in the region. 

3 April, AtoZForex The New Zealand financial regulator, Financial Markets Authority (FMA) has confirmed that the Binary Options and CFDs brokers will need to attain a trading license in order to operate in the region.

New Zealand Binary Options licensing

Some groundbreaking news just emerged for the international companies seeking to operate in the Asia-Pacific region. The financial authority of New Zealand has obliged businesses selling short-duration derivatives to attain a license.

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The New Zealand regulator states that it has been assessing these products. The FMA further explained that the products can potentially cause risk for traders. Thus, the New Zealand watchdog has held discussions with the industry before deciding on the license necessity. The FMA Director of Regulation, Liam Mason, has stated:

“We have been monitoring developments in the market since the introduction of licensing for derivatives issuers. We have also been receiving a steady volume of complaints about short-term FX trading and other derivatives products.”

Starting from December 2017, any firm promoting financial instruments to New Zealand residents that settle within 3 days, will need to obtain a license. This is irrespective of the location of the company, as the rule applies to overseas and local firms. The FMA encourages all companies with no authorization to apply for a license latest by August 2017.

Rising complaints about unlicensed derivative-issuers

Moreover, the regulator is seeking feedback on whether to utilize its power to declare that spot Forex contracts that are settled by delivery of an amount of currency within 3 working days are not derivatives. Such move would be aiming for the Financial Markets Conduct Act. Commenting on the news, Mr. Mason has added:

“Short-term derivatives are very high-risk products and this risk is worse when providers with no license are providing them. About 40 percent of the complaints we receive are about unlicensed derivative-issuers, and a common theme is that people have difficulty in getting their money back.”

He also stated that FMA believes that such idea would provide more firmness to the sectors about the scope of the regulation of derivatives. Moreover, the regulator wants to ensure that this change won't affect normal Forex contracts.

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