CySEC Gets Tough On Binary Options Brokers

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Two of the biggest problems with binary options, for regulators and traders alike, is a serious lack of transparency and standardization within the industry. Each platform is different; the way in which the options are traded, payouts are calculated and the types and range of expiry vary greatly which only adds to confusion already caused by lack of transparency. CySEC has recently begun to take action to address these issues. These changes are meant to help standardized trading, increase transparency, give better terms for clients and provide enhanced investor protections.

The proposed reforms now under consultation will enhance the nature, characteristics and trading methodology of this type of retail financial instrument. The new proposed standards regarding the Digital Options Contracts will seek to eliminate the cysec 60 seconds binary options demo account of concern regarding the practice that are found commonly to be followed by those providing binary options products, ensuring firms act in an honest, fair and professional manner.

The reforms are intended to achieve 4 main goals. These are 1 to ensure that brokers act honestly, cysec 60 seconds binary options demo account and in accordance with their customers best interests 2 to cysec 60 seconds binary options demo account that adequate information about the products being offered is provided to clients 3 ensure to orders are executed in a manner favorable to clients and 4 to ensure that orders are executed and filled promptly and expeditiously.

The proposed changes are as follows. These reforms all sound really great and bring to mind a couple of things. This means that the brokers will have to change, and most of them will not be able to keep up. The second thing I think of is that the type of trading these changes describe already exists. Reform Is On The Way Two of the biggest problems with binary options, for regulators and traders alike, is a serious lack of transparency and standardization within the industry. Remove Opaque Strike Pricing — They propose to ban the current method of floating strike prices.

The strikes will have to be listed before the trades are made, similar to ladders, and be the same for all traders. Lift Restrictions On Exiting Trades — They propose to have all restrictions on exiting trades lifted. This ties into the pricing, there must be continual two way pricing where sellers know what they can get for closing at any time.

All options will have at least 5 minutes of expiry. CySEC proposes to require all brokers to use cysec 60 seconds binary options demo account same, CySEC approved, settlement algorithm to calculate pricing and options values as they approach expiry and expire. No individual methodology would be allowed.

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CySEC has long been the leader in binary options regulation. They were the first to take up regulation of spot style European binary options and continue to lead the field. While regulation is a good thing, the agency has long been criticized for how they handle the industry, the requirements for regulation and the myriad gray areas in which brokers, marketers and service providers continue to operate. In response they have taken on hard line approach that many see as a good thing for the industry.

One of the many issues impeding the advancement of binary options trading is the method in which call-centers operate. For the most part, regulated brokers use third party marketing agencies to handle advertising and client acquisition.

These centers can be but are not always located outside of Cyprus and the EU and use untrained, unlicensed employees to reach out to clients. Complaints include misleading clients to the risks of trading and high-pressure tactics used to compel deposits.

Countries such as Israel have outright banned the operation of brokers in their jurisdiction because of this, others like France and Canada actively warn against unregulated and fraudulent brokers. This is when a CySEC regulated broker uses a broker registered, headquartered or regulated in another country to draw clientele, trade and provide liquidity for trading. The practice is allowed by CySEC and EU law and only causes problems when the 3 rd party broker in question is regulated in a manner not consistent with the CySEC framework or is not regulated at all.

The thing to remember is that binary options are legal in the EU. Brokers now face fines up to 1 million Euros for non-compliance. Similar requirements have also been proposed for the use of market makers. Earlier this year CySEC revealed some changes brokers will have to make in order to remain compliant. For the most part, the brokers are pleased with the new rules and, in fact, some brokers were already moving in that direction.

The IQ Option spokesperson went on to say that the new rules will force a consolidation in the industry. The smaller brokers and the scams will not be able to keep up with the changes leaving only the larger, more established and more trustworthy brokers behind. Technology providers are not immune to the changes either.

Most brokers are white labels of top platforms like Tech Financials, SpotOption and Tradologic who will also have to comply with the changes. Tech Financials, the first publicly traded binary options platform provider, executive director Jeremy Lang believes the changes are good for the traders and the industry.