Are you interested in investing in binary options?
Searching for a regulated binary options broker?
Among the risks involving binary options trading is the lack of regulation of most brokers. Here you will find out which brokers are regulated, and what assurance does such regulation give traders.
Binary Options Trading System
Binary options companies are sites that offer you the possibility of purchasing a financial derivative, whose purpose is to allow you to predict the outcome of an asset. Essentially, you are buying the right to make a prognosis. If your forecast is correct, you earn, if it is wrong, you lose.
The trading system in this business has some flaws, or risks, that are very common in today’s world. Among those issues, is the fact that all customers deposit or transfer money to companies which, to them, only have a virtual existence. In other words, the only contact the client has is with a site.
Who is behind these firms? How trustworthy are they? How safe is your money in their hands? These important questions are normally answered with declarations given by brokers, about how they have safeguarded your funds in various ways. Yet the only serious and reliable form of guarantee is regulation, something that the binary options trading system severely lacks.
What is regulation?
A company that is regulated is one that has complied with a series of rules imposed by a regulatory body, which only gives its stamp of approval to that firm if it maintains the standards and laws as set by the regulator.
Commonly, when it comes to investments, financial transactions, and money transfers, the main concern of the regulator is to ensure that the company, at all times, has the necessary amount of cash at its disposal, to give all customers their monies, if they should so request.
Who is a regulator? In almost all cases, it’s a governmental agency, part of a government, which regulates financial institutions. Banks are a common example of a business that must comply with regulations of the country where it is seeded. Another common example? Casinos. Which of these two examples is closer to the binary options field is a key point for you to understand.
Regulated binary options brokers
Does it help if your broker is regulated? In theory, the answer to that question would be a resounding YES. Except that, no government has created a set of laws that would enable binary options companies to have a regulation, except for Cyprus.
As a result of the decision by the Cypriot government to create a regulatory process for binary options companies, many of these brokers moved their businesses to that European island. Since then, many companies have received a regulation stamp and the entire binary options field is changing, and becoming a mainstream financial tool.
Certain brokers have tried a new approach to lure customers, by receiving a different type of regulation. One example is MarketsWorld, a small binary options company which has received indeed formal regulation. Except that this endorsement is being given by the Gambling Supervision Commission of the Isle of Man. How does that help you?
Binary Options Regulation Process
The problem binary brokers face is common to a new field. Since this type of derivative has only existed for a few years, most countries have no laws that can define how binary options should be treated. Since it is highly speculative, some countries tend to place it in the same category as gambling.
This creates problems to both customers and brokers. If it would be considered gambling, binary options would cease to be a financial investment, and would then be outlawed in many markets. On the other hand, the binary companies would have to conform to extremely rigid and costly laws that govern casino licensing, forcing these firms to review their ability to offer such high yields.
Choosing a suitable broker
Ultimately, what will serve as the biggest assurance for you is the opinion of fellow traders. The binary field is extremely competitive, with many new companies joining the market every month. Only a handful of those have the professionalism and the seriousness needed from an investments firm.
Companies such as Banc de Binary, Redwood or OptionWeb have all been properly regulated. Yet, they have not let this step slow them down, and have remained proactive in making sure customers have all the free learning materials and trading tools they need to become better online traders. They also have the efficiency of sending payments in a timely manner, offering professional investment advice and giving new customers an additional cash bonus.
It is probably wiser to choose one of these binary options firms rather than one which claims to have regulation at a time when no government has yet defined how to grant regulation to binary brokers.
Regulated Binary Options – Summary
- Regulation guarantee customers that their monies are safe and can be retrieved at all times
- A regulator in the financial field is almost always a government agency
- No country except for Cyprus has created a legal regulation process for binary options trading
- As a result, binary brokers have migrated and some companies have completed the regulation process
- Some brokers have sought a regulation process originally meant for other fields, such as gambling
- Although these brokers are officially regulated, the customers are then legally considered gamblers, not investors. These has several implications
- Therefore, the most effective current guarantee for customers is to choose the most respectable and reputable brokers among those with a CySEC license
- Several other European countries such as Italy and France are working on legislation that would permit proper regulation to binary companies within these countries