UK Binary Options Regulation Is Binary Options Gambling or Investing Is there any difference This post casts an eye over the possible stance of the FCA and their attitude to UK binary options regulation. UK binary options regulation will (next year) become the responsibility of the UK Financial Conduct Authority (FCA). As the status of binary options continues to exercise the minds of the good and great in the financial regulatory offices around the world, now the UK8217s FCA (reluctantly) joins this merry throng. Binary options, until now, have been considered gambling in the UK and as such have been regulated by the UK Gambling Commission: until now because the UK has now decided that binary options are to be regulated by the UKs Financial Conduct Authority (FCA). Is this an implicit acceptance that binary options trading does not comprise of gambling and is a bona fide investment or is it the UK once again doffing its cap to Brussels and imposing legislation it does not like, support or agree with BinaryBets When the UKs largest spreadbetting company, IG Index, first introduced binary options they were marketed as Binarybets indeed, they had a separate website binarybet (although that is now just a link to their composite IG Index site) and this was regulated by the precursor to the UK Gambling Commission. The IG page that the above binarybet link redirects to spurns the use of the term binarybet now preferring to use binary type or binaries, except when referring to their regulation when binarybet is used. So, on the IG site is offered an insight into the confusion reigning over the status of binary options a binary option is termed binary, binary type or in conjunction with regulation, a binarybet but never a binary option, whereas a variable tick-size future is referred to as a spreadbet and is regulated by the FCA Department for Culture, Media and Sport The UKs Department for Culture, Media and Sport (DCMS) on August 5 th sent the following letter to the UK Gambling Commission who have published it: DCMS Letter. The assertion that: Binary options are a form of fixed odds bets on financial markets followed by: This would bring binary options within the remit of the Financial Conduct Authority (FCA), in line with standard European practice suggests possibly that this move is a move that the authorities are not entirely comfortable with. Should the regulatory authorities, in particular the FCA, drag their feet on the issue it remains to be seen how long binary options in the UK will be unregulated since operators will not, for the time being, require a gambling operating licence to offer binary options. A final comment on the above DCMS letter pertains to the statement Operators who offer binary options alongside more traditional betting products will merely find this part of their activity regulated by the FCA. Many sports bookmakers and casino operators will at present have zero exposure to financial products apart from binary options and subsequently will not already have activity regulated by the FCA. It remains to be seen whether these particular operators wish to jump through the more rigorous hoops that gaining binary options regulation from the UK FCA recognition will require. If these operators do decide to attain FCA approval then along with the new binary options providers attracted to the UK market there could be a considerable application backlog. FCA Definition of Binary Options The DCMS has defined a binary option as a fixed odds bet yet is overseeing the transfer of regulation from the Gambling Commission to the FCA. Clearly a new definition of what exactly constitutes a binary option is urgently required since the reference to a fixed odds bet is now obsolete. There are a number of aspects of financial instruments in general that need to be considered in defining this new investment, e. g. time frame, settlement price, margining, price format and presentation just for starters. If the time frame of the life of the option is just 60 seconds does this qualify it as an FCA investment If the time frame is deemed to short then why is High Frequency Trading with sub-second in-and-out deemed to be an investment and permitted Binary Options Strategies The NYSEs ByRDs follow the mistaken and common acceptance that binary options have to settle at 0 or 1(00). Combinations of binary options mean that the settlement price does not have to settle at 0 or 1(00), e. g. a ratio of two binary calls could provide settlement prices of, say, 0, 40 amp 100. Just as a conventional call spread (made up of two conventional call options) is still considered conventional options trading, binary options strategies (made up of a combination of binary options) are still binary options trading. Will the FCA now permit the margined trading of binary options Logic would suggest that since the UKGC used to be considered the correct regulatory environment owing to the fixed odds nature, i. e. the client could not lose more than was wagered, then this particular attribute could be ignored. Will a binary option be a binary option if it is offered in the percentage return format that has become so prevalent and popular The mathematical formula of a binary option price is constrained by the lower and upper limits of 0 and 1 respectively. Will this pricing format be rigidly adhered to or will a factor of 100 be permitted, i. e. a range of 0 100 Alternatively bookmakers offer the odds in the sport fixed odds style, e. g. 64, 118. will this constitute a binary option Who is to say that one cannot trade financial markets, e. g. GBP v USD in the form of a game of bingo, a virtual horserace or a virtual game of roulette Pioneering Binary Options Regulation The FCA has the opportunity to take CySecs pioneering good work and provide binary options regulation in one of the foremost financial centres of the world. The credibility the Japanese FSA8217s binary options regulation has given to binary option trading in the Far East should not be underestimated. The UKs FCA is in a position to do the same in Europe providing it does not take too much self-interested advice from market participants who attempt to tailor the FCAs product restrictions to facilitate their own products and eliminate the innovation brought to the marketplace by new product providers. This should and could be one of the easier products for the FCA to regulate since assuming that providers will not offer short-term margining the retail public can only lose what has already been placed in their accounts. This also applies to the providers so unlike spreadbetting companies that require many millions of financial collateral to support the unknown losses they may incur, binary options providers are able to always know in real-time what their maximum downside risk is. Providers and users of these simple, retail-friendly and limited risk instruments must hope the FCA does not drag its heels and miss the opportunity to give the binary options industry the credibility it so urgently seeks. Binary Options Legislation and Regulations in Cyprus Regulation of Binary Options in Cyprus Cyprus was one of the first European Union countries to regulate financial betting. The country decided to regulate binary options knowing that it would attract a lot of brokers as a consequence. This way, most of the brokers operating would be paying taxes in Cyprus. Obviously, Cyprus couldnt have just implemented whatever regulations it wanted. The binary options trading laws of this country naturally have to be in line with the laws and regulations of the European Union as well. Cyprus would have risked infringement procedures if it had implemented laws that are not in conformity with EU regulations. This is why the claim that Cyprus binary options laws and inadequate are false. Cyprus may be a small and insignificant country but it is a member of the European Union. As such, its obliged to implement the same kinds of financial service laws as other member states. In fact, if you look at the online investing laws of this country and compare them with those of the UK you will realize that they are more or less the same. This is because both countries laws were built taking in consideration European Union regulations. In fact, the binary options licenses issued in the country are actually valid in the UK as well The Cyprus Securities and Exchange Commission Financial investing is regulated in Cyprus by the Cyprus Securities and Exchanges Commission (CySEC). This organization is a government agency that has the power to implement new regulations and rules that CySEC licensed binary options brokers are brokers interested in acquiring a license will have to follow. The CySEC also has the role of supervising all the licensed brokers. If a broker breaks the countrys and the European Unions binary options laws, CySEC will intervene and take appropriate measures to remedy the problem and punish the offender. The punishments issued by the CySEC range based on the severity of the offence. Most of the time the regulator requires brokers to implement measures that will make sure that the committed offense will never happen again along with imposing a heavy fine. However, in cases of serious fraud and breach of regulations, the CySEC may as well remove the license issued to a broker. And once a broker loses its license, no trader in the world will trust it anymore. Contrary to popular belief, CySEC is a very strict regulator. Are Cyprus binary options laws adequate Yes, the financial betting laws of the country are adequate in protecting traders no matter where they live. You should not let yourself influenced by the fact that Cyprus is an insignificant country and therefore its regulations cannot be trusted. Cyprus isnt just a remote island. Its a full member of the European Union that is forced to respect all the rules and regulations of the EU. The European Union is extremely strict with countries that dont follow the law. The country might even find itself expelled from the EU if it would break EU law. Financial situation of Cyprus brokers Due to the 2013 Cyprus financial and banking situation many traders are concerned about their deposited money at Cyprus binary options platforms. Since the country8217s government implemented a measure that imposed a 40 haircut on all bank deposits in the country, traders fear that their money can also be seized at any moment. However, this is not the case. Most if not all Cypriot financial service providers keep their money in accounts in different countries such as the UK, Luxembourg and Switzerland. This is common knowledge thats also enforced by empirical evidence. The best evidence that shows that financial brokers in this country keep their money abroad is the fact that no money was lost or seized from brokers whatsoever after the Cypriot government implemented the bank haircut. So, yes, your money is definitely safe at Cyprus brokers. Cyprus Binary Options Brokers The majority of the financial service providers operating today on the market are from Cyprus so there is a plenty of choice for traders. However, not all brokers offer really great services and run on top-notch online trading technology. In order to help you find the best Cyprus binary options brokers we have created the toplist that you see on the top of this page. All the brokers listed there obviously have a valid license issued in the country and as such follow all the rules of the country and of the European Union. If you live in pretty much any country on the globe, then you should choose to register at one of these brokers. At this moment these are the safest financial service providers that exist. Brokers licensed in other countries (such as some weird islands outside the EU) should not be trusted. Naturally, the brokers listed here arent just licensed but are also proven to offer great quality services. For example, they have very large selection of assets that will enable people to create various advanced binary options winning strategies. These strategies can be expanded though the usage of the different options types provided. The high payout rates provided by the listed brokers will make sure that traders will be able to cash in substantial profits on winning trades. Naturally, the listed brokers also offer attractive first deposit bonuses on traders deposits. Check out the reviews of these brokers if you are interested in trading at high-quality service providers. You wont be disappointed. We also recommend you check out our binary options educational material as well as strategy guides that will make sure that youre well-prepared to trade binary options online.
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