How And Where Are Binary Options Regulated
Regulation is an important topic among binary options traders. Some are for it, some are against it. Some brokers choose to be regulated and others have moved so they won’t. Some brokers may be avoiding regulation for bad reasons, the kind of reasons that raise questions of honesty, others to avoid limitations imposed by regulation. Not all regulated brokers are good and not all unregulated brokers are bad so how do you know the difference? Choosing the right binary options broker is the most important decision a binary options trader can make and know the differences between brokers is crucial to making that decision.
It is important to check into your local laws before choosing a binary options broker. Some politicians and countries are against the practice and taking steps to block or ban binary trading. Most recently Italy made a move to begin banning binary options broker IP’s, Japan is another. Italy seems to be blocking only non-CySEC regulated brokers at this time. Japan is still in the process of creating laws to govern the industry but is allowing previously established brokers to operate.
CFTC Binary Options Regulation
The CFTC regulates binary options in the U.S. along with the OCC and the SEC. The CFTC is mandated by the Commodities and Exchange Act to protect U.S. citizens from fraud, to regulate trading instruments and service providers and to ensure fair play. At this time there are only three sources of CFTC regulated binary options in the U.S. These are NADEX, AMEX and CBOE. AMEX and CBOE binary options are traded alongside regular stocks and options on the major exchanges. The problem with them is that not all brokers choose to list them. NADEX is the North American Derivatives Exchange and is the only true binary options exchange legally operating in the U.S. NADEX binary options are different than European style binary options but come with many advantages. Click here for more on the advantages of NADEX binary options.
CySEC Binary Options Regulation
After the rise of binary options industry the Cyprus Securities and Exchange Commission decided to officially recognize binary options as financial instruments. This allowed them to impose regulation on the industry which largely resides on the island. The loose banking laws that attract off-shore money to Cyprus also attracted binary options brokers. CySEC regulation holds binary options brokers accountable through third party oversight and the possibility of sanction. As an added bonus because of Cyprus member status in the European Union CySEC regulated binary options brokers are recognized as financial services throughout the EU and the European Economic Arena. This means that CySEC brokers can operate in any EU country through the economic passport laws. CySEC regulation is being sought after by most of the top binary options brokers but it does come with at least one handicap. CySEC regulated binary options brokers can not market to U.S. citizens. There are a couple of CySEC brokers we recommend: 24Option, Banc de Binary and Anyoption. Banc de Binary is currently regulated, 24Option and Anyoption are in the final stages. My top binary options broker is 24Option because of the high level of customer service, video center, webinars and extensive list of assets and expiries. Since the addition of the new 2 and 5 minute options 24Option now has expiries ranging from 60 sec to end of day, end of week and end of month.
FSA Binary Options Regulation
The FSA is the Financial Services Authority of Great Britain. This is the official regulatory body for all financial services, instruments and providers in the United Kingdom. The FSA was the first regulatory body to recognize a CySEC regulated binary options broker outside of Cyprus. Banc De Binary was the first but is surely not going to be the last. As each Cyprus based binary options broker achieves regulated it will likely move on to FSA and other certifications as well. At this time there is only one FSA registered binary options broker, Banc de Binary. BDB is the best UK binary options broker simply because of the high level of regulation. BDB also has an extensive list of assets and expiries ranging from 60 second to the end of the year.
BaFIN Binary Options Regulation
BaFIN is the financial regulatory agency of Germany. This agency oversees the financial industry and has accepted CySEC regulation in a similar fashion to the FSA. Binary options brokers can seek official regulation from BaFIN once they get CySEC approval. CySEC approval is key for this move since it is the step that gets a binary options broker officially recognized as a financial services provider. One way to avoid BaFIN, FSA and CySEC regulation is to headquarter a binary options broker somewhere in Europe such as Germany where it can be classified as a European Investment Firm providing Ancillary Services. Banc De Binary is proving its commitment to the binary options industry by obtaining BaFIN regulation as well. It is currently the only BaFIN regulated binary options broker.
BVI FSC Binary Options Regulation
The British Virgin Islands Financial Services Commission is yet another international agency with some oversight of the binary options industry. Banking laws in the BVI are among the loosest in the world which has given rise to its attraction as an off-shore banking center and base for spot forex brokers. Brokers with this designation are primarily forex brokers with a small offering of binary options. There are a few exclusive binary options brokers operating here. The status of binaries in the BVI is unclear, OptionsClick is advertised as a BVI FSC broker by some websites but there is no listing for it or its parent company on the BVI FSC register. Be sure to check your local laws before choosing a BVI binary options broker.
Isle Of Man GSC Binary Options Regulation
The Isle Of Man is a small island between Ireland, Scotland and England. It is another attractive location for international business due to its easy legal requirements. One industry that has flourished here is the gaming and online gambling industry. The Isle Of Man GSC is the Gambling Supervision Commission. It issues gaming licenses and regulates the gambling industry headquarted on the island. One broker of note, Marketsworld, has been advertising that it is a UK regulated binary options broker. In a sense that is true but it is also misleading. Marketsworld is a regulated UK business but it is regulated as a casino and not as a financial company by the FSA.
NADEX In Europe And Australia
IG Markets, the parent company of NADEX, operates binary options markets in Europe and Australia. These markets are regulated by the appropriate regulatory agencies and are legal financial instruments. NADEX options are different than European CySEC style binary options and IG options are different from NADEX and CySEC. From what I have seen IG Market binary options are more complicated to use than NADEX or CySEC options. The major difference is the make up of the contracts. IG markets sells CFD’s or contract’s for difference. These are leveraged derivative trading instruments that have some properties of binary options and some properties of futures or spot forex. Another major difference from binary options is the possibility of loosing more than your original deposit.