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Binary Options Regulation – Is it True?
Introduction to Binary Options Regulation
I’ve decided to open another series of articles with an article about regulation matters, not because i think it’s the most important thing a trader should look for in a broker (and it’s not), but because I think that’s the most discussed issue by most binary options traders.
Potential traders from all around the globe are beginning to understand the fine benefits of Binary Options, but somehow the whole binary options industry still seems quite blur for most people. The increasing growth of binary options brokers is defiantly not synchronized with the amounts of information given by these brokers about their product. Therefore, it’s not a big surprise to see so many confused people just longing for some clear information, for something to hold on before depositing their hard earned money. From my experience, all these worries and lack of information leads to one simple phrase pronounced by these fuzzy traders: “Binary Options Regulation”.
Let’s make it clear- Regulation is an advantage, not a must. Just take a look at the small and un-important Forex industry (hope you all realize I use cynical, those of you who don’t know the Forex industry should do some learning before beginning with Binary Options…). The biggest Forex brokers are now valued by billions, but at the beginning, they weren’t so different from today’s binary options brokers. It’s important and advised to be suspicious towards new trends, but be reminded that sometimes putting your finger at the right trend at the right time could make you great profits. It took quite some time before the Forex industry became fully regulated, similarly, it will take more time for the binary options industry to claim full regulation. In today’s market, traders could find a few already regulated Binary options brokers (or on process), our readers could find most of these brokers on our trusted binary options brokers list.
How and why do we need Regulation?
First, for those of us who have absolutely no idea what’s regulation is all about: if a company is regulated or not regulated, it doesn’t mean it conducts legal business or illegal business if not regulated. So why regulate at all? For several reasons. First, despite the free markets liberal overlook, markets and economies can’t function properly without a basic set of rules to ensure physical rights, underpin transactions, and antitrust laws for safeguard fair competition. Rules and regulations carry the weight of law but are not written by lawmakers. Instead, they’re issued mostly by bureaucrats who rely on information and advice from experts to form the basis of the new standard. Therefore, the main reason behind regulation is to ensure that the company is handling its business in light of the law, and to protect the company from other companies who do not apply to rules of regulation.
Second. In many cases, rules and regulations are implemented because some people have forgotten the fair business rules and now the rest must pay the price. The rules are essential requirements to ensure the safety of those directly involved plus the greater good of all related population. Regulation is necessary to mitigate broader market failures in competitive industries. For us as clients, regulation is needed to ensure protection of consumers from abuse, to introduce and maintain safety standards, and to protect individuals from scams and frauds. In a perfect world, laws, rules and regulations ensure a better product or service, better distribution, safer environment and, in general, better guidelines with which to move forward to progress.
Regulation and Binary Options
The field of Binary Options is relatively breached, both since its quite fresh and the different definitions of binary options trading in different countries. In the U.K. for example, Binary Options falls into the “gaming” category, while in others countries Binary options trading is “gambling”. Same goes to Forex, before regulation. The reason for that is that different states have different definitions, legal definitions, for the same industry. That’s why Binary Options is not available in all countries. In the U.S, which is stricter than other countries when it comes to people’s money, not all assets are available to trade. Some brokers don’t even allow U.S traders to deposit. On the other hand, both Europe and the U.K do allow all traders to trade all assets. Asian markets are even less strict.
The first countries to issue legal statues to Binary Options platforms and Brokers where, as always, the tax shelters countries: BVI and Cyprus. Many internet gambling and trading website companies are located in those countries, mostly in Cyprus due to its physical and legal linkage to Europe. That’s the reason why most Binary Options brokers are also located in those countries, and of course, the low to zero taxes. Moreover, most regulation processed in Cyprus effects European citizens also. The Cypriot regulators have already began processing binary options brokers appeals to regulation, inside information told me that its only a matter of a couple of months before the first brokers would be officially regulated by the Cypriot regulators, as for the U.S. – it’ll take time, and that’s bad news for Americans – E.U regulation is only good for Europe, regulated brokers would have problems working with American costumers. Hopefully the U.S. would follow the European footsteps soon, so that trading will be safer and available to anyone.
When a broker is not regulated, it doesn’t mean it’s a scam! The main reason why regulation is an advantage (and of course should be the main goal of the binary options industry in the end) is because when a broker is regulated it means the deposited money in kept in a safe account and monitored by a third party to ensure fair-play. Since the Binary Options industry is quite fresh (the first brokers only opened for business on 2008), most brokers don’t have the longed regulation. Nowadays, we can see many countries, From Northern America to the Far East and Australia and back to Europe, beginning to understand the risks for the growing number of traders and benefits for their own economy and therefore allowing slowly but with caution some regulation. The way I see it, Australia is currently the most advanced country in terms of regulation, but sadly those regulations do not apply in the US also, for example.
Each and every country have their own laws and restrictions, for example, many tax shelter countries with an increasing economic growth (especially in the financial markets) such as Cyprus or British Virgin Islands are now allowing regulation for some binary options brokers under their own restrictions which also applies to other countries.
Full regulation all around the world still has long way to go, meanwhile, we advice our readers to stick with the popular under regulation or on process binary options brokers since they’re considered by most experts as safer and better trusted brokers.
CySec Binary Options Regulation – The near future of regulation in europe. Read More.