One of the fastest growing financial products today are binary options. This is mainly due to the simplicity of its operation compared to other instruments and their fast and high returns offered to investors. However, unlike the brokers specialized in the Forex market, most binary options brokers are not properly registered and regulated with any financial regulatory agency.
Now, we will explain the advantages offered when a financial services company is regulated and which are the binary options brokers that are proppely regulated and by what agencies.
The Binary Options Brokers
The popularity of binary options has reached such a point that there has been a proliferation of brokers specialized in these derivatives. While in principle this is a good thing as competition drives these companies to offer enhanced services and many extras for their customers, it has also led to the emergence of companies that do not offer any security to their customers about their services and their practices.
In the case of Forex market, many brokers are properly regulated by important regulators of financial services, which gives customers greater security and peace of mind regarding the management of their funds and the legality of the practices of these companies.
Many traders interested in binary options would like to have a similar level of security and for this reason they seek brokers that comply with this requirement and that have a proper control under any financial regulatory agency.
Of course this does not necessarily mean that a broker that is not regulated is automatically a company with unethical practices and whose operations are not very serious. By contrast, there are binary options brokers that do not have any control and are distinguished by the high quality of its services and practices. Nevertheless, trading in the binary options market with a regulated company can be advantageous because the trader knows that he/she is a customer of a company that must meet certain regulations of legal nature and must operate with greater transparency.
Major advantages of a broker regulation
The following is a list of the main advantages offered by a properly regulated broker:
Financial standards and monitoring
The brokers regulated by agencies such as CySEC or the FCA must comply by obligation with strict financial standards, including capital adequacy requirements. In some countries, the companies are required to submit their financial reports to the regulators. Depending on the law of the country, these rules are applied by regulators, who have the right to fine firms and/or terminate its status as a financial services provider.
Greater transparency of business practices
Major financial regulatory agencies maintain records of all formal proceedings against financial services companies registered. With a few clicks on the website of the regulator, an investor can find out if the firm has had serious problems with customers or the regulator itself. This promotes transparency as the broker probably does not want to get involved in any procedure that can cause problems for its reputation or it may even cause a fine or suspension.
A legal framework for dispute resolution
Regulatory legal frameworks offered by financial regulators provide protection to traders and investors against practices they consider unfair or unethical on the part of brokers. If there is a dispute between the company and the customer which can not be resolved between the parties, then the customer can appeal to the regulator to apply appropriate measures.
Payments of regulated brokers are insured
Payments of regulated brokers to their clients are fully insured, regardless of the financial condition of the company. By opening an account with a regulated broker, the trader acquires the right to file a complaint to the regulatory authority to resolve the differences between the broker and the customer and act if they find any unethical practice.
Top financial regulators
Major economies worldwide, including the U.S. and Europe have specialized agencies whose purpose is the regulation of markets and financial services. Below is a list of the main financial regulators which is displayed along with their country of origin:
-Finacial Conduct Authority (FCA): Formerly known as FSA. Currently it is the highest authority in the UK for the regulation of financial services. It has authority to introduce regulations and inspection and enforcement powers so that its goals are met.
-Australian Securities & Investment Commision (ASIC): It is the Australian body responsible for the control of companies and individuals that provide financial services in the country. ASIC watch that these actors operate with transparency and integrity.
-Federal Financial Supervisory Authority of Germany (BaFin): This is the authority responsible for the regulation of financial services in Germany. Actually it is an independent federal institution that is under the complete supervision of the German Federal Ministry of Finance.
-Cyprus Securities and Exchange Commission (CySEC): A committee whose job is to regulate the financial markets of Cyprus and financial services companies in the country. It is responsible for ensuring that these companies comply with the financial regulations of the European Union and Cyprus.
-Comisión Nacional de Valores (CNMV): An agency from Spain which is responsible for regulating financial services in the country and all actors involved in their financial markets.
-National Futures Association (NFA): A U.S. organization that is responsible for the complete control of the entire U.S. industry related with the futures markets.
-Commodity Futures Trading Commission (CFTC): A U.S. government agency whose function is to regulate the operations performed in the futures market of that nation.
In regards to binary options, currently only CySEC and FCA are starting to look more seriously this market and are accepting brokers who specialize in these instruments. In fact, today many of these companies are in the process of registration with CySEC. This is because most binary options brokers have their head offices located in Cyprus. The reason is simple, this country charges lower taxes on corporate profits (10%) compared with other nations, which allows these companies to save costs. Actually, these brokers are funded with capital from countries like the UK and even Australia.
List of Regulated Binary Options Brokers
Banc De Binary
Through the following link you can access a list of binary options brokers:
Currently, binary options brokers that are regulated or are in the process of obtaining a license from agencies as CySEC or FCA are rather few compared with Forex brokers. This is because the growth of these financial instruments was relatively new when compared to others. Furthermore, until recently in many countries binary options are considered just as a way to bet like the financial spread betting, so regulatories agencies like CySEC initially were reluctant to accept these companies.
However, experts believe that over time more and more companies of this type will be accepted by regulators possibly to give a legal framework to an activity that has become so popular among investors in the financial markets. Today, the regulation is required by serious investors and traders seeking a higher level of security for their capital and who seek the necessary peace of mind so that they can with with a broker that allows them to only worry about the market.