13 April, AtoZForex.com, Lagos — Following the footsteps of the Dutch AFM, the UK government is in the process of designing a regulatory framework for Binary options. This will mark a transition from being treated as gambling to an investment, according to a recently published draft legislation consultation paper by Her Majesty’s Treasury.
The AFM recently granted its first binary options license to Optieclub, after a running legal battle between the regulator and the binary options broker.
The UK’s decision to treat binary options as an investment will now require a modification to the framework on ground. With the adoption of the EU’s Markets in Financial Instruments Directive (MiFID), this didn’t cover Binary options.
Many other countries who also adopt the MiFID have made adjustment to it, in order to accommodate binary options trading. According to the UK government, this creates inconsistencies as to whether firms offering binary options can or cannot passport across the EU. It also creates confusion for subscribers of binary options about their status and potential inconsistencies in consumer protection, for what can be seen as risky products. This is one of the reasons which prompted the decision.
The proposed framework will require rules regarding capital requirements and that the range of investor protection rules in MiFID would also apply. The British government is therefore seeking comments and suggestions on its proposed draft legislation to bring binary options within the legal framework that covers contract for differences (CFDs) in the UK.
A spokesperson for the UK Gambling Commission aired his opinion via the statement: “For most existing licensed gambling operators this will have little or no impact on their business. The effect of this is that operators will not, for the time being, require a gambling operating licence to offer binary options, and no application to the Gambling Commission to do so will be necessary until further notice.”
He also clarified that the Gambling commission will not be affected per say as Binary options account for less than 1% of the Gambling Commission-regulated online gambling market. Therefore, UK to treat Binary options as an Investment vehicle will not have a significant effect on the commissions income.