Binary options trading is a relatively new method of financial trading and as such it took some time to establish the rules of regulation applicable to binary option brokers. Around 2009 when binary options first began growing in popularity, most brokers were independent and weren’t subject to the regulations of any authorities in charge of supervising the operations of financial service providers. This left the door open for dishonest practices and fraudulent schemes.
Considering how rapidly the binary options sector expanded, the Internet was flooded with brokers, some of which had less than professional intentions. Many brokers’ only goal was to collect traders’ money and then close their business without paying the due payouts. Others manipulated the charts and tables with market data in their favor in order to benefit to the disadvantage of the traders. There have also been various other complaints that traders often have when it comes to binary brokers.
See Full List of Regulated & Recommended Brokers HERE.
What is a Regulated Binary Broker?
In the last few years, however, there have been significant improvements in the regulation of binary option brokers. The serious brokers that want to provide investment services on a highly professional level apply for licenses with the relevant governing bodies. Brokers that hold licenses operate in compliance with the applicable laws and regulations and must meet a number of criteria.
Follow This Link to learn more about one of the most reputable brokers, which is also regulated. We suggest it, because it is highly reliable and trustworthy – 24Option.
For example, brokers must provide to their customers segregated accounts, which guarantees that traders will receive their payouts no matter of the financial situation or solvency of the broker. Regulated brokers are also obliged to provide authentic market quotes, to protect clients’ private data and to ensure the safety of all transactions. Overall traders should proceed cautiously when choosing a binary options broker and to stay on the safe side it is advisable to pick a regulated one. This is not to say that unregulated brokers are always a scam. There are many binary brokers that provide good services but haven’t yet obtained a license.
However, if a trader encounters problems with their unregulated broker, they won’t be able to file a complaint or get assistance from the competent authorities. Therefore it is recommended to sign up with a regulated binary options broker in order to enjoy a safe and secure trading experience because the fact that the broker holds a license issued by the authority in charge of monitoring the activities of financial service providers ensures quality and transparency of the investment policies.
Binary Options Regulation Authorities
Binary options brokers are licensed and supervised by the government agency responsible for regulating the financial markets by country or geographical region. Every country has its own regulation authority, which usually publishes on its website all the companies that have been licensed. It is advisable to check whether the broker you are considering to sign up with is licensed by the relevant regulator. Such regulating bodies are for example the Australian Securities and Investments Commission (ASIC) in Australia, the Financial Conduct Authority (FCA) in the UK, the Financial Services Agency (FSA) in Japan, the Monetary Authority of Singapore (MAS) and the Commodity Futures Trading Commission (CFTC) in the United States.
Although each country has its own regulator, there are some exceptions like CySEC for example. The Cyprus Securities and Exchange Commission is the regulatory agency of the Republic of Cyprus, but because it is a part of the Markets in Financial Instruments Directive (MiFID), which harmonizes the regulation of investment services in all countries of the European Economic Area, brokers licensed and regulated by CySEC are allowed to operate in all European Union member states.
Many financial service providers choose to base their companies in Cyprus because of the lower corporate tax and the opportunity to operate everywhere in Europe. On the CySEC website traders can find a list of all the companies authorized by the Commission along with license numbers and other useful information.
As binary options trading continues to grow in popularity new brokers emerge on the market all the time. To be on the safe side traders are advised to proceed with caution and sign up with a licensed and regulated binary options broker.