Binary Options Regulation, Where One Market Shrinks Another Expands
Strict Regulation Hurting Japanese Binary Options Market, Helping In Others
Regulation has long been a point of interest for binary traders and broker alike. The benefit for the traders is obvious, better trading. The benefits for the brokers is less obvious as it makes operation harder and may in fact hinder the growth of the industry. This is most evident in new data out of Japan, data that shows a shrinking number of traders in that region. On the flipside, regulation is a boon to other brokers who are seeing an expansion of trading in their respective markets.
Japanese regulators are noting a sustained downturn in both trading volume and active accounts. The Financial Futures Association of Japan, the FFAJ, issued a recent report showing a -16% decline in activity and a -3% drop in account in May, the fourth month of decline. As of this last report there are only 7 registered and regulated binary options brokers operating in the country, down 1 from the previous month as JFX has exited the binary market. Within the report the regulator revealed that all major currency pairs, except the GBP/USD, had seen declines in activity.
One reason for the decline is regulation. The Japanese authorities are notoriously strict on regulation and this rigidity makes it very hard for new brokers to enter the market. In evidence of this, the Kanto Bureau of Japan’s Finance Ministry has just added 7 new names to its warning list, including BinaryTilt, due to non-compliance with local regulations. Basically, any broker not registered in Japan and offering services in Japanese or to Japanese clients is at risk regardless of regulated status in other jurisdictions.
Regulation Helps Binary Options Growth
In other markets, namely the EU and US, there are signs of a growing acceptance of binary options trading and regulation. In the UK, SpotOption has just opened a new office in London, its third global business center. The move is intended to help increase the company’s foot print in the EU so it can focus more fully on expanding regulated binary options trading. The office will initially be staffed by 10 professionals whose purpose is to service the growing number EU regulated brokers.
According to Pini Peter, SpotOptions founder, “our London office was the necessary step in SpotOptions realization of our vision, to expand globally and bring regulated trading to the masses”.
Nowhere is the benefit of regulated trading more evident than in the US. The US market has long been plagued by off-shore and unregulated brokers, mostly due to a lack of regulated choices, but new evidence shows traders flocking to NADEX. In their latest report the company reveals that binary option trading has grown 64% (total number of trades) and 68% (total trade volume) year over year from the same quarter last year. According to Tim McDermott, CEO of NADEX, the growth is due to several factors.
“Part of that is our technology innovations, bringing free, powerful trading platforms to our members. But we think the main reason is that our business model levels the playing field for retail traders, by offering on-exchange, limited risk, and low-cost access to the markets.”
The bottom line is that regulated trading is expanding around the world. While it seems that strict regulation is hurting the industry in Japan, the same can not be said of the US where it is obvious that CFTC regulated binary trading is growing substantially from year to year.