Binary Options Regulation: trade safely
Before we get into the nitty gritty of regulations and the why’s and wherefore’s it is important to say that it is by far not the biggest issue with Binary Options. I know that was a pretty negative opening statement but the truth of the matter is that the world of binary options is still something of a closed book, and it is this approach that gives it a somewhat unfavorable reputation. Whose fault is it? Well the blame can only really lie with the brokers themselves. Like many traders the world over options brokers are created by those who have lived in the trading world and have become somewhat jaded in their opinions and customs. When put into a saleable product they are out of their element and as such take an aloof “well if you don’t know how to trade then it isn’t the place for you” and their lack of foresight has lead to a poor image.
Of course what most people don’t yet know is that it is actually something of a hidden gem that is slowly taking the trading world by storm by opening up what was once the arena of big companies with teams of traders to the common man with small budget numbers but a willingness to learn.
As it currently stands the overall image of binary options is that it is somewhat similar to gambling and I guess in some parts it is but that is a very short sighted way of looking at it. What this short statement fails to tell you is the skill, research and strategic planning that goes into trading successfully taking it from gambling to an equal of playing the full markets. But of course unlike the actual markets, which options are still based off, you no longer have to actually buy the stock and hold it. You can simply trade against it.
In terms of brokers and regulation what you are looking for is CySec coverage. The Cyprus Securities and Exchange Commission (or CySec for short) is the governing body that regulates the way brokers offer options. This is simply because the majority of brokers trade out of Cyprus. UK brokers differ in that they can also be covered by Financial Conduct Authority (FCA). In simple terms the difference between regulators is so that they can comply with the internal laws of the country they operate in.
There are many great brokers out there who are covered by the regulators and offer great binary options solutions but given how new the system is non regulated brokers exist and trade perfectly happily. No regulation does not automatically mean scam. The real benefit of being regulated is money security for third parties. Counter to this are the laws of certain countries that force options into boxes that it does not fit into making regulation somewhat difficult. Overall of course for the safety of the brokers and their clients regulations should be formed to cover them all but as I often remind myself the large markets like the NASDAQ and the FTSE all stated out just as Binary Options are and look how they turned out.