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Binary Options Legal Status Guide
Recently, however, the industry has undergone a massive upheaval. More and more countries have moved to put a hard ban on binary options trading.
This guide will help you figure out the legal status of binary options trading in the following countries: Australia, Belgium, Canada, Cyprus, France, Israel, Japan, Malaysia, Malta, the Netherlands, Russia, Singapore, South Africa, the United Kingdom, the United States.
Please keep in mind also that none of the information in this guide constitutes legal advice. We are not legal experts in any capacity, and if you choose to trade binary options or offer them to the public, you do so entirely at your own risk. We are not liable for any losses or legal consequences you may incur.
The information on this article was last updated on July 23, 2020.
Trading binary options is legal in Australia, though the Australian government does caution traders to be wary of investments.
The relevant financial regulatory body in Australia is the Australian Securities & Investments Commission (ASIC). ASIC maintains a publication called “Money Smart,” where they have published a brief for consumers on binary options.
The article makes it quite clear that it is fully legal for Australian citizens to invest in binary options. The guide does state the following:
Make sure the binary option provider has an Australian financial services (AFS) licence or is authorised by an AFS licensee, regulated by ASIC. To see if a company holds an AFS licence, search ASIC’s Professional registers.
This seems to be a strong suggestion, rather than a legal stipulation, but just to be safe, you should probably follow ASIC’s recommendations.
Looking toward the future, however, it is possible that ASIC will decide to put a ban on binary options. In a June 26, 2020, media release, ASIC announced that it is deciding whether to take product intervention measures against binary options and CFDs, similar to those in Europe. The public is allowed to provide input on the proposed measures by August 7, 2020, after which ASIC will reach a regulatory decision. This decision will be published in September 2020.
Best Practice: Australia urges consumers to think twice before investing in binary options, but takes a relatively liberal stance toward them. You can legally trade binary options if you are an Australian citizen, but you should stick with those that are regulated by ASIC or have an AFS license. You should also keep a close eye on the news, as binary options trading may soon be banned in Australia.
This is a country where trading binary options is illegal. As of August 2020, the Financial Services and Markets Authority (FSMA) in Belgium banned all binary options brokers from doing business with Belgium citizens.
As of the start of 2020, the FSMA has reported that it has been receiving more and more complaints from consumers regarding binary options as well as other “financial products and services.” In total, 792 messages were received last year. This accounted for almost half of all the complaints which the FSMA received, and represents an increase in 45% versus the volume of complaints for 2020. FSMA also continues to add new companies to its list of untrustworthy binary options and cryptocurrency brokers.
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There will not be any regulatory changes since binary options are banned in Belgium already. But this does mean we shouldn’t expect the FSMA to reverse that decision anytime soon. It also has broad relevance to the increasing awareness of binary options scams around the world.
Best Practice: Binary options trading is banned in Belgium altogether. Do not trade binary options as a resident of Belgium.
The Canadian government has never been fond of binary options, despite the popularity of binary options in Canada.
The main regulatory body in Canada in charge of handling binary options concerns is the Canadian Securities Administrators (CSA).
Over the past few years, Canada has moved to restrict binary options trading progressively more and more. It started with an investor alert in 2020, which originally urged traders to “exercise caution when considering an investment in binary options.”
There are no registered individuals or firms permitted to trade binary options products in Canada.
This was followed by a ban which went into effect in December 2020.
Best Practice: If you are a Canadian citizen, do not trade binary options.
In Cyprus, binary options brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). The CySEC is notoriously loose about its regulatory criteria, which is why most binary options brokers seeking regulation choose to go through the CySEC.
Historically, The CySEC was notoriously lax with regulatory criteria, which is why most binary options brokers seeking regulation chose to go through the CySEC.
All of that has changed now. The CySEC started to talk about tightening up regulations on binary options trading in February 2020. That same month, they imposed a rule requiring brokers regulated through The CySEC to inform them if they were offering their services to clients outside the European Union.
All of that became irrelevant later, as Cyprus is a member of the European Union, and the ESMA has passed a ban (see the relevant section below) on binary options trading. That applies to Cyprus.
The CySEC sent out a circular on June 4, 2020, addressed to Cyprus Investment Firms. The circular (#C271) concerns the ESMA product intervention decision on binary options which goes into effect on July 2, 2020. As you likely are aware, this “intervention” amounts to a ban on binary options.
The circular clarifies that the geographic location of the client is irrelevant where the new regulations are concerned. Here is the exact statement:
CySEC has escalated the issue to ESMA who have confirmed that the application of the product intervention powers under Article 40 of MiFIR are not limited to clients who are based within the EEA. ESMA explained that the MiFID II/MiFIR regime does not discriminate on the basis of the location of clients, but rather it applies to services provided by investment firms which are authorized in the EEA.
Since then, there have been more changes in CySEC and throughout Europe with regards to binary options.
ESMA will no longer be renewing its temporary product intervention measures, but CySEC will not return to allowing binary options trading. On July 10, 2020, it announced its own permanent ban on binary options:
The Cyprus Securities and Exchange Commission has issued a directive banning binary options following instructions by the European Securities and Markets Authority (ESMA).
Best Practice: Under the new regulations, you may no longer trade binary options legally in Cyprus.
In 2020, the regulatory body Autorité des Marchés Financiers (AMF) implemented a ban on advertising of all binary options, Forex and CFD products which included leverage at levels of 1:20 and up. Note that this was a partial ban.
Since then, AMF has continued to take aggressive action, going so far as blocking advertisements of binary options products to French consumers.
The AMF also continues to meet regularly with the High Court of Paris to take action against websites which are illegally offering binary trading services to French citizens. Earlier this month, the regulator put out a new press release (in French) which summarizes the success of its efforts. The regulator reports that over a period of three years beginning after 2020, 138 illegal sites were blocked. As of May 2020, there are 445 firms in total on the blacklist.
France is a member nation of the European Union, so under the ESMA’s temporary product intervention measures, citizens of France were not allowed to trade binary options at all.
With those measures now at an end, the AMF decided to adopt national intervention measures. The notice states:
Following a public consultation conducted in spring 2020, the AMF has decided to take over the ban on the marketing, distribution and sale of binary options to retail investors, in France or from France.
Best Practice: Do not trade binary options in France, as they are banned.
Israel used to be the center of the binary options universe. It was such a big industry in Tel Aviv that thousands of people relied on it for their income. Unfortunately, it was scam central as well.
The Israeli parliament passed a ban in October 2020, forbidding Israeli brokers from doing business with customers overseas. This was the final nail in the coffin because Israeli brokers have been banned from doing business with Israeli customers since the prior spring.
A push was made to appeal the ban to the Supreme Court, which affirmed parliament’s decision. The ban on binary options in Israel has been in effect since January 26, 2020. With scandals continuing to be exposed in Israel and around the globe, it is unlikely this policy will be reversed anytime soon.
Indeed, there has been a string of raids and arrests. You can read about the FBI’s raid of SpotOption in Tel Aviv, and learn about the indictment of Lee Elbaz. You can also read about the mass arrest in the Philippines, which included 8 Israelis.
Best Practice: Do not trade binary options if you are Israeli.
In Japan, the regulatory body which is responsible for addressing binary options is the Financial Futures Association of Japan (FFAJ).
Japan has not placed any sort of ban on binary options trading, though it does have a lengthy document stipulating the rules for binary options transactions with Japanese customers. For example:
- Binary options trades should never be shorter than 2 hours in length.
- Pricing and payout information should be transparent.
- Clients should be assessed before they are offered services.
If you are a resident of Japan and you want to trade binary options, you should go over this document (FFAJ Guidelines for OTC Binary Options Transactions) to make sure that you are dealing with a broker that is following the rules.
Best Practice: You may trade binary options in Japan, but you need to make sure that you are doing business only with companies which observe the guidelines set by the FFAJ.
The regulatory body you should familiarize yourself with in Malaysia is the Bank Negara Malaysia, which is the central bank of Malaysia.
The Bank Negara Malaysia seems to have very little to say regarding binary options at all. If you run a search on the official site, very little comes up.
One article is the one on illegal Forex trading. Here is one passage:
Illegal Foreign Exchange Trading Scheme refers to the buying or selling of foreign currency by an individual or company in Malaysia with any person who is not a licensed onshore bank or any person who has not obtained the approval of Bank Negara Malaysia.
From this statement, it seems reasonable to assume that one should trade with caution in Malaysia, dealing only with licensed companies.
Best Practice: Before you trade binary options in Malaysia, run a search on the company you are thinking of using to see whether they have obtained the central bank’s approval.
Binary options trading is currently banned in Malta, but a little discussion of Malta’s past involvement in the binary options industry is of interest.
Originally, binary options in Malta were categorized as gaming products. But in 2020, the Malta Financial Services Authority (MFSA) announced that binary options would henceforth be categorized as investment products subject to Markets in Financial Instruments Directive, 2004/39/EC, (MiFID) rules.
As with the CySEC in Cyprus, the MFSA used to license binary options websites in Malta.
When ESMA’s temporary product intervention measures went into effect, binary options trading was banned in Malta since Malta fell under the ESMA’s jurisdiction as a member nation of the EU.
While the ESMA has abandoned its temporary product intervention measures, it has done so because so many member nations are adopting product intervention measures of their own.
As expressed by the title, this document described MFSA’s proposed national product intervention measures against binary options trading and requested feedback.
If you read through the responses from MFSA to industry comments, it is clear that the regulator plans to go forward with a permanent ban on binary options in the country.
Best Practice: If you are a citizen of Malta, you cannot trade binary options.
Even before the new ESMA rules, binary options trading in the Netherlands was essentially banned. The relevant announcement was made on September 16, 2020, by Minister of Finance Jeroen Dijsselbloem while taking questions from Parliament. Dijsselbloem said during the session that he would be partnering with the Netherlands Authority for the Financial Markets (AFM) to set up an advertising ban on binary options.
Merel van Vroonhoven, chair of the AFM Executive Board, stated:
We consider it very important to introduce an advertising ban on binary options and other toxic investment products. Advertising for these investments entices consumers with the prospect of earning money fast, but it is actually the case that you can easily lose all of the money you have put in.
Under the ESMA’s rules, the ban on binary options trading in the Netherlands became total.
Now, following the dissolution of the temporary product intervention measures from the ESMA, it should come as no surprise that the Netherlands is pursuing a permanent ban on binary options as well. You can read more about that in this document titled ESMA OPINION UNDER ARTICLE 43(2) MIFIR (AFM_BO).
Best Practice: Do not trade binary options in the Netherlands.
Russia is one of the more unusual and ambiguous cases when it comes to binary options regulation. Until very recently, the country took next to no interest in regulating binary options at all. This is one of the reasons binary options products are so popular in Russia.
The Bank of Russia is the authority which is responsible for deciding what to do — or not do — regarding the regulations of binary options in Russia.
Recently, the Bank of Russia has started to look into possibilities for regulation. Financial One even mentioned first deputy chairman Sergey Shvetsov promising “that in the near future, binary options and CFDs will be banned for sale to unqualified investors.”
Thankfully, as of May 2020, an actual official statement was released in the central bank’s Annual Report for 2020. This report discusses a called, “Amendments to the Federal Law on Securities and Other Legislative Acts of the Russian Federation.”
Under this bill, binary options would be regulated as a gambling product. There are not a lot of details available yet on exactly how this would play out, but essentially binary options would be legal, but only within a gambling context.
This seems like quite a sensible response to the entire controversy surrounding binary options. The product itself is not the cause of severe monetary losses for consumers so much as the false advertising which has been used to market it. If Russian consumers see binary options products marketed solely as gambling products, they can make informed decisions about how to responsibly manage their funds.
Best Practice: If you are a Russian citizen, you are free to trade binary options anywhere you want at this point in time. In the future, it is likely that binary options will be regulated as a gambling product. Just make sure you do your homework and pick a trustworthy broker that is not going to scam you.
The relevant regulatory body in Singapore, when it comes to binary options, is the Monetary Authority of Singapore (MAS). On the whole, the MAS has been very lax about binary options.
In March 2020, the MAS issued a warning to investors concerning binary options trading, specifically on platforms which are unregulated. This warning was released in response to complaints received by the MAS.
In May 2020, the MAS has published a warning in conjunction with the Singapore Police Force regarding unregulated trading platforms. According to the warning, the Commercial Affairs Department (CAD) of the Singapore police Force received 40 complaints from consumers in 2020 who lost money trading on platforms online which were unlicensed. In 2020, there were 142 complaints, which represents a major jump. In total, the losses for 2020 added up to S$7.8 million.
The complaints in question concerned not only binary options platforms, but also platforms for Forex, commodities, shares, and other assets. MAS would like to remind citizens to check the Financial Institutions Directory, Register of Representatives, and Investor Alert List on their official site before doing business with any online broker.
If you believe you have been scammed by an unlicensed broker or you want to report a company you suspect of fraud, you can submit your report at Police page.
Best Practice: As advised by the MAS in the linked notice, Singapore citizens should only trade with binary options brokers that are regulated and listed in the MAS Financial Institutions Directory. Citizens should also avoid those which are listed in the MAS Investor Alert List.
In South Africa, the agency in charge of financial regulation is the Financial Services Board (FSB). From what is known at this point, the FSB is not particularly involved with binary options and does not currently regulate any binary options brokers.
The FSB does routinely issue warnings to the public about doing business with various binary brokers. For example, FSB warned traders against Binary Tilt in September 2020.
The FSB usually concludes these warnings by reminding the public that one should always look up a broker with the FSB to check whether they are “authorized to render financial services.”
As such, it seems the FSB would prefer that traders in South Africa only do business with companies regulated by the FSB. But it can also be inferred from these specific blacklist warnings that the FSB has not instituted a complete ban on binary options trading.
Best Practice: The FSB’s position on binary options is extremely vague. It appears you can legally trade if you are a citizen of South Africa, but you should exercise caution.
Binary options are presently banned in the United Kingdom under ESMA rules. But a discussion of binary options in the UK requires more depth, especially since the situation has changed dramattically on March 29, 2020.
In the United Kingdom, the Gambling Commission used to be in charge of regulating binary options brokers. This applied exclusively to brokers with remote gambling equipment located within Great Britain.
Under the Gambling Commission, consumers in Britain were able to use the services of domestic and overseas binary options sites.
That meant even brokers that were not regulated by the Gambling Commission could legally offer services to UK customers.
All of that changed on January 3, 2020. The authority to regulate binary options passed from the Gambling Commission to the Financial Conduct Authority (FCA) through an amendment. Binary options switched from being regulated as a gambling product to being regulated as an investment product.
The Gambling Commission retained its database of license holders as well as its guide to binary trading.
All firms trading in binary options need to be authorized by us. Below is a list of firms without authorization that we understand are offering binary options trading to UK consumers.
That was another change. It meant that regardless of location, all binary options companies needed to be regulated by the FCA for UK customers to use them. While that did not imply that it was a crime for UK citizens to trade with unauthorized companies, it did imply that it was a crime for those companies to operate in the UK without FCA approval.
Like the Gambling Commission, the FCA maintained a general information page on binary options. It also maintains the FCA Register of Financial Service Firms. There is a list of unauthorized binary options firms as well as a page where consumers can view recent warnings.
The UK is still a member of the European Union, but you likely know that the Brexit completion is presently scheduled for 23:00 GMT on October 31, 2020.
This previously raised a lot of questions about what the UK was intending to do about binary options after leaving the European Union. But there have been a couple of developments since then which have answered those questions. For one thing, the ESMA is no longer maintaining separate product intervention measures against binary options.
For another, the FCA decided on its own to maintain a permanent ban on the sale of binary options to retail consumers:
Following consultation feedback, the Financial Conduct Authority (FCA) is today confirming all firms acting in or from the UK are prohibited from selling, marketing or distributing binary options to retail consumers.
That notice was published in March 2020, and the ban went into effect on April 2, 2020.
Best Practice: Do not trade binary options in the UK, where they have been banned by the FCA permanently.
In the United States, the Commodity Futures Trading Commission (CFTC) is in charge of regulating futures, swaps, and other financial markets.
The CFTC is notoriously rigid in its stance toward binary options trading. Ironically however, the US is now one of the few countries which has not passed a complete ban on binary options trading. Then again, this is the upside of tight regulation. It prevents the kind of rampant corruption which would require a ban.
Here is what the CFTC has said about binary options:
It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called ‘prediction’ contracts, unless they are listed for trading and traded on a exchange or unless legally exempt.
It is difficult to interpret this, but it should be noted that the key word here may be “solicit.” Basically, it is against the law for brokers to deal with USA customers unless they are approved by the CFTC. The CFTC regularly penalizes companies that break this rule quite harshly.
The CFTC also maintains the Fraud Advisories page for consumers. The main idea of the advisory is summarized in the following paragraph:
Because of their lack of compliance with applicable laws, if you purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U.S. regulator, you may not have the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors.
This does not actually state that trading with an unregulated broker is illegal. It essentially implies, “let the buyer beware.”
The CFTC does suggest that US traders take the following steps before trading binary options:
- See if the platform is registered with the SEC.
- Make sure the platform is an actual exchange.
- Find out whether the platform is a designated contract market.
- Use the BASIC database provided by the National Futures Association (NFA) as well as FINRA’s BrokerCheck to verify the status of a broker.
Right now, very few brokers are registered with the CFTC. The main one is the North American Derivatives Exchange (NADEX).
The CFTC makes ongoing efforts to add untrustworthy brokers to its RED List.
Many recent headlines surrounding arrests and indictments has focused on US cases. For example:
- The CFTC has charged a resident of Colorado named Dillon Michael Dean with swindling customers in a Bitcoin and binary options scheme to the tune of $1.1 million. The CFTC is attempting to penalize Dean $1,497,792.12. Dean however has gone missing. He took the time to pack his possessions and clear them out of his residence, but he has not turned up since. It would seem he is on the run.
- In July of 2020, the CFTC filed a complaint with the United States District Court Middle District of Florida in Jacksonville against Jason Scharf and A&J Media Partners, Inc. in conjunction with a binary options scam called “Millionaire Money Machine.” Now, Finance Feeds reports that the court has sided with the CFTC, and will be issuing an Order of Permanent Injunction and Other Statutory and Equitable Relief against the accused.
- In April 2020, the CFTC has decided to take an additional step to educate the public about the widespread scams, which have plagued the binary options industry, by releasing a video titled The Truth Behind Binary Options Fraud.
This was followed up by a series of videos that further expounded upon the same topic. Titles in the series include A Silvery Slope: Bob’s Story, True Fraud Stories: Binary Options Fraud Ep. 1, and True Fraud Stories: Binary Options Fraud Ep. 2.
All of the videos are available to watch at the CFTC SmartCheck Videos section.
Erica Elliott Richardson, CFTC Director of Public Affairs, does well summarizing the situation:
Binary options can be helpful hedging tools for some traders, but there are only a few entities that can legitimately do business with individual investors in the U.S. These videos serve as a call to investors to check the registration of the company they are trusting with their money.
Indeed, this is one of the fairer assessments that you may read from a financial regulator on the subject of binary options. Binary options can be legitimate tools, and they can be used profitably — but right now there is a lot of dross out there, and consumers need to be very careful.
We can only hope that after the scammers are dealt with, binary options as a legitimate investment vehicle will receive more positive press, and it will be easier for consumers to find trustworthy brokers to work with.
Best Practice: If you are a US resident, you are best off trading with a broker which is operating legally. That means a broker like NADEX.
Google and Facebook
In February 2020, Facebook announced that it would stop running ads for binary options, ICO products, and cryptocurrencies. This decision was made at the urging of Canadian and US authorities.
On March 14, 2020, Google followed suit. Scott Spencer, the Director of Sustainable Ads at Google posted a notice titled An advertising ecosystem that works for everyone.
If you scroll down near the bottom of the document to the heading “New policies to tackle emerging threats,” you can read the following statement:
This year, we updated several policies to address ads in unregulated or speculative financial products like binary options, cryptocurrency, foreign exchange markets and contracts for difference (or CFDs).
If you click through to the link above, it takes you to an article titled Financial Services: New restricted financial products policy (June 2020). Here the company is much more explicit about its intentions, stating:
In addition, ads for the following will no longer be allowed to serve: Binary options and synonymous products.
This applies to aggregators and affiliates as well.
Google Play also introduced a new binary options policy which states simply:
We do not allow apps that provide users with the ability to trade binary options.
Essentially this comes down to a full ban on the part of Google against binary options.
Now, we need to circle back around to Facebook. Just a few months later in June 2020, Facebook decided to reverse its ban on the cryptocurrency advertisements. So far, there is no indication that they will be extending that reprieve to binary options or ICO ads, which remain banned.
Summary: Advertising binary options is currently banned on both Google and Facebook.
A sweeping change came to the financial markets in Europe as of January 3, 2020: MiFID II.
In case you are not familiar with MiFID, it stands for “Markets in Financial Instruments Directive.” MiFID went into effect in 2007, and applies across the entire European Union. It is a regulatory framework which helps to reduce abuses in European financial markets while setting authorization requirements and boosting transparency.
MiFID II is a revision to the original MiFID, and will seek to provide even more transparency in the markets.
The impact that this new regulatory framework will have on the binary options industry was complex from the off. For example, a lot of binary options brokers immediately threw out match deposit bonuses with high turnover requirements in order to conform to the new rules.
Finally, let’s summarize the history of ESMA regulation concerning binary options.
Rumors that the European Securities and Markets Authority (ESMA) might ban binary options first cropped up in 2020, followed by an official announcement from ESMA in December of that year.
In January 2020, ESMA opened consultation on the new set of rules they were proposing. During the consultation period, ESMA accepted comments from the public.
In April 2020, ESMA announced that they would proceed with the complete ban of binary options trading. This is the same ban which has been mentioned in many of the sections above for European countries. Under the ban, companies were forbidden from engaging in the marketing, distribution or sale of binary options to retail customers throughout the EU.
Factors cited include:
- Poor transparency
- “Structural expected negative return”
- Differences between the returns that are expected and the risk of loss, which tends to be significantly higher
- Marketing and distribution concerns
- Conflicts of interest (most brokers profit when their traders lose, and vice versa)
According to the ESMA, around 74–89% of retail investors end up in the red, typically anywhere from €1,600 to €29,000. The ESMA Chair Steven Maijoor states:
The combination of the promise of high returns, digital platforms, in an environment of historical low interest rates has created an offer that appeals to retail investors. However, the inherent complexity of the products and their excessive leverage – in the case of CFDs – has resulted in significant losses for retail investors.
In June 2020, the ESMA has put out a press release stating that they have adopted the final product intervention measures on CFDs and binary options.
In the press release, ESMA states:
…the measures have been published in the Official Journal of the European Union (OJ) today. They will start to apply from 2 July 2020 for binary options and from 1 August 2020 for CFDs.
The wording for the binary options ban is as follows:
Binary Options (from 2 July 2020) — a prohibition on the marketing, distribution or sale of binary options to retail investors.
The ban was temporary in nature, with the option to renew at the end of a timeframe. The ESMA then began a period of successive renewals of the temporary prohibition on binary options every three months.
That practice came to an end on July 1, 2020. On that date, the ESMA published a notice titled ESMA CEASES RENEWAL OF PRODUCT INTERVENTION MEASURE RELATING TO BINARY OPTIONS.
The notice explained:
As most national competent authorities (NCAs) have taken permanent national product intervention measures relating to binary options that are at least as stringent as ESMA’s measure, ESMA will not renew its temporary prohibition.
The notice also added that the ESMA will “continue to monitor activities in relation to these and other related speculative products to determine whether any other measures may be needed.”
Summary: The ESMA is done with temporary product intervention measures against binary options, but only because most member nations are adopting permanent bans against binary options.
Q: Can I get around my country’s ban on binary options?
A: It can be frustrating to find out you live in a country, which has completely banned binary options. This may make you wonder if you can just use a VPN to access an offshore broker and make a deposit.
While this may seem tempting, you should not do it. First of all, at some point (probably when you withdraw), the broker will require you to verify your identity. At that point, you will be unable to complete the process. You might lose your investment, and/or get banned from the platform.
Secondly, you could be reported to your country’s authorities, and might incur a penalty as a result.
Q: How do I know a regulator is legit?
A: Sometimes while you are researching binary options brokers, you might stumble across “regulators” that do not appear to have any financial authority. This may leave you feeling a little confused.
One example is the Financial Market Relations Regulation Center (FMRRC) in Russia. On first glance, this might sound like a real regulatory body. But if you look a bit closer, you will discover it is not one.
The FMRRC is an independent organization. It was put together to provide certifications to binary options brokers in Russia since the Central Bank of Russia does not provide any sort of legal regulatory status. In fact, it was actually a broker that started the organization.
To that end, the FMRRC has no legal authority. It is not a real regulator. It does offer oversight, but it is hardly unbiased, and the interests of brokers are the overriding concern, not the interests of consumers.
It is totally up to you if you want to take certifications like those offered by FMRRC seriously. Just remember that membership in an organization like this does not represent real regulatory status.
Real regulatory bodies are always either government entities or independent organizations that work closely with government authorities to provide fair, oversight.
Q: What if my country’s stance on binary options is unclear?
A: You should never take any chances. In a lot of countries, binary options exists in a legal gray area. If you are unsure if what you are doing is legal or not, always call the financial regulatory agency in your country and ask directly.
Q: Is binary options trading dead?
A: Not necessarily. The industry as we knew it is certainly coming to an end, but that does not mean that binary options trading will remain banned in so many countries forever. After this period of upheaval, it is possible that a few legitimate brokers will emerge with licenses to do business with serious customers. Policies are always up for reconsideration. Hopefully the next incarnation of this industry will be a more honest one.
Q: I cannot trade binary options in my country anymore! What do I do?
A: If you are unable to trade binary options in your country, that does not mean that you cannot profit by investing in stocks, currencies, commodities, or indices. It simply means that you need to invest in these assets through different platforms (e.g., Forex brokers). As other platforms tend to offer more in the way of tools and control, you may find that you are happier and more profitable by doing so anyway.
The Bottom Line: This Is a Tough Time for Trading Binary Options
With the temporary product intervention measures of the ESMA behind us and more and more countries passing permanent bans on binary options trading, we find ourselves in a challenging new era for the industry.
Nonetheless, binary options trading is not banned universally around the globe. If you are in a country where it is still legal, you can still participate, but you should play it safe and use a regulated broker. If in doubt, always contact your country’s financial regulatory authority and ask questions before you engage in new investments.
If binary options trading is no longer allowed in your country, consider trying other forms of investing instead. Many of the skills you developed as a binary options trader should translate easily to other forms of trading.
Good luck, follow your country’s laws, and stay safe.
Beginners Guide to Binary Options
When you have an interest in trading Binary Options online or via a mobile device you will of course need a full understanding of how to do so.
With that in mind we have put together the following step by step guide that will enlighten you on how you can master the fine art of trading Binary Options and also find the perfect Broker based on your level of trading experience and the volume of trades you wish to place.
You will of course need to spend some time learning all of the different aspects required to pick out the best Broker to sign up to, and also researching the type of trades you wish to place and a whole plethora of different aspects that will make you into a much more informed trader.
However, if you do follow this guide from start to finish we know you will gain all of the knowledge you will need in regards to you being able to spot potentially profitable trades whilst also being able to know which are the best types of trades to place, where to place them and also how to make use of the many different trader bonuses which can lock in additional trading value.
* Amount to be credited to account for a successful trade
You will first need to understand all of the many different types of Binary Options trades that you are going to be able to place. This is even before you find a Broker at which to sign up to.
By knowing the different types of trades available you will then be able to locate a Broker that is going to offer you the range and types of trades you are going to be interested in placing. With that in mind do read through our guide on the types of Binary Options trades you can place as you may be surprised at just how many different trades will become available to you as a trader.
Choosing Which Trades to Place
One you have an understanding of the range and types of Binary Options trades which can be placed online or via a mobile trading platform you will then need to gain a full understanding of the types of trades which are going to appeal to you the most.
Whilst very experienced traders are always going to be prepared to place trades on anything that is likely to return a profit to them, as a first time and inexperienced trader you may be better off placing trades on companies or commodities that you have an interest in or are very familiar with.
Utilising Economic Calendars
Information is power, more so when you are a Binary Options trader and with that in mind you are always going to need to have access to the very latest financial news stories. However, at various times of the years all developed countries of the world will release financial data which will give an indication of how certain different market sectors are performing in their respective countries.
Please do familiarise yourself with the economic calendars that will enlighten you on a huge array of different financial data and information, as once you know how well different market sectors are performing in each country you can then use that knowledge to help you select the types of trades to place which are likely to help you make financial gains.
Choosing a Binary Options Broker
It is only once you have mastered all of the above qualities and aspects of placing Binary Options trades that you should then start to look around for a Binary Options trader to open an account at.
By putting together a checklist of wants and demands based on what types of trades you wish to place and the variety of trading options you are looking or will you then be able to match your wants and demands with a Binary Options Broker.
Opening Up a Trading Account
One aspect to opening up a Binary Options trading account that is often overlooked by many first time traders, is that there are in fact often several different account types available to you at many different Brokers.
With that in mind we would suggest you read through our guide to opening up a trading account for we will enlighten you on the many different types of trading accounts that are available to you and will point you in the right direction in regards to the type of account that will suit you best.
Methods of Funding a Trading Account
You will of course need to decide how you wish to transfer funds into your trading account whilst also having a method available to you for withdrawing your money out of a trading account when you have made one or more winning trades.
We therefore invite you to take a look through our guide to the many different ways of funding your trading account as there are likely to be several very cost effective and convenient methods available to you based on where it is you live and reside.
Making Use of Trader Bonuses and Promotions
As there is so much competition between Brokers for your custom you are always going to find some form of trader bonuses and promotional offers available at any Broker you do sign up to or are considers joining.
With that in find we have compiled a guide that will walk you through the many different types of trader bonuses and will help you gain an understanding on which ones offer you the best value.
Binary Options Trading Strategies
As you become a more experienced trader you will soon start to discover ways of trading that often tend to make you more regular gains and profits. Every experienced trader will have their own unique trading strategy and as such we would suggest you take a look through our guide which covers that very topic.
By putting into place some form of strategy and always following it when placing any type of Binary Options trades online you are going to have a structured way of trading and one that will be tailored to you personally.
Making Continued Profits
Our final educational guide to Binary Options is going to look at ways you can make continued profits as a Binary Options trader. Whilst it may take you some time to fully master the art of placing traders online or via a mobile trading platforms, once you have there are some high profits to be made 24 hours a day.
What are Binary Options? The Complete Guide
We often get asked: What are binary options? Binary options are one of the popular ways to make money trading financial instruments. They’re quite different from traditional options in terms of who offers them, their liquidity, rewards and risks as well as payouts. Also, they’re more accessible to traders compared to traditional options thanks to online brokers that allow you to trader from anywhere in the world.
Any trader wishing to invest in binary options must understand the risks and potential rewards involved. It’s also important to understand that not every company offering binary options is legit. That’s why we’ve created this site to guide you through some of the top binary options brokers available today.
What are binary options?
Often classified under exotic options, a binary option is a financial option where the returns are either a fixed amount or nothing at all. Usually, the fixed monetary return is $100. Binary options go by different names depending on where you’re trading from. The names include fixed return options (US), all or nothing options and, digital options.
Another way to describe binary options is how they operate. A single transaction dealing with binary options is based on a simple yes or no proposition depending on how the trader speculates a financial instruments price will move. The trader will simply make a purchase (call) or sell (put) depending on how they answer the question:
Will the price of the financial instrument traded be higher or lower than the current price at the expiry period
If the trader speculates that the price will be higher, making a call will be the next step. If however, the trader speculates a drop in price, he or she will place a put. Upon expiry, traders who make correct speculations make profit. However, those who speculated incorrectly will lose their investment.
But what happens if at the expiry period, the price hasn’t changed?
In most cases, you will get your investment back and won’t incur any loss or gain profit. The amount refunded however depends on your broker. Binary options allow traders gain access to different globally traded assets including precious metals, currency pairs, indices, commodities and stocks.
However, rather than actually buying the underlying asset (for example buying Google stocks), you’re trading on the underlying asset’s price movements. This allows you to invest as little as $10 on a single trade.
A detailed example showing how binary options work
You have decided to trade the S&P 500 index which is currently trading at $1430. After consulting the different charts and technical tools, you conclude that the price is going to rise over the next few hours. However, you cannot predict by how much. You therefore decide to place a call (buy).
Since the broker offers several expiry periods that range from 5 minutes to 1 month, you decide to hold the trade position for 10 minutes. That is, if after 10 minutes the price of the S&P 500 index is over $1430, you’ll make a profit. If it’s lower, you’ll lose your investment. Your broker indicates that you’ll earn a 70% on your investment (profit).
Depending on your account management strategy, you decide to invest $100 on the trade (we usually recommend about 2% of your total account value). At expiry time, the price of the S&P 500 index is $1432. An increase of $2. This means that you have made a $70 profit (70% of $100). You account is therefore credited with $170.
Note that the $2 increase in the price of the S&P 500 index is not your profit since you don’t actually own the asset. Your profit is earned on the amount you invested. Therefore, if S&P index price dropped to $1429, you would have lost your $100 investment. On the other hand, if the price at expiry remained at $1430, it’s likely that your broker would simply refund your $100.
This example describes a simple high/low options trade. Today’s brokers often offer other exotic options trades that include one touch and range. Here’s a brief overview about how each one works.
How one touch binary options trades work
Using the example above, one touch trade rules require the S&P 500 price movement must touch a predetermined price level before the expiry period. You are usually provided with two price levels, one above the current price and one below it.
Still using the S&P 500 current price of $1430, your broker might provide a price range between $1400 and $1460. After analysis, you conclude that since the price is rallying, it should hit $1437 before it starts dropping. You also conclude that it will hit $1437 within 150 minutes.
Using the one-touch trade, you simply place your price level at $1437 or lower and an expiry of 150 minutes.
If the price reaches $1437 before the expiry period, you’ll make a profit. If however, it never reaches $1437, you’ll lose your investment.
How range binary options trades work
As the name suggests, range binary options trades allow you to speculate a specific price range within which you expect the underlying assets price to remain within for a specific amount of time. Profits are earned if the price remains within the selected range upon expiry of the trade.
Using the example above, the range would be between $1430 and $1437 within 150 minutes. If the price drops below $1430 or rises above $1437, you’ll lose your investment.
As you might have noticed, exotic binary option trades come with high risk and reward potential compared to high/low trades. While classic high/low trades offer returns between 50% and 85%, exotic trades can offer returns of up to 500%.
A higher return makes it easy to make enough profit to cover losses you might incur on other trades. However, you’re advised to be careful when entering trades that offer unrealistically high returns since potential of incurring loss is usually higher than that of making a profit.
Trading binary options from different regions in the world
If you’ve been shopping around for a reliable binary options broker, you might notice that some brokers will reject traders from specific regions. The reason for this is that binary options brokers need to be licensed and regulated to offer their services to citizens of specific countries. Many binary options brokers have actually been charged and fined by regulators from different countries. For example, the US Securities and Exchange Commission (SEC) charged and fined a Cyprus based broker for selling binary options to US citizens illegally in 2020. The same firm was also fined by its regulator CySEC.
Choosing a binary options broker, therefore, requires that you first consider your home country and the local laws that regulate binary options trading. Some countries have actually banned binary options. It also requires that you consider whether the broker is licensed and regulated by the financial authorities within your country. Regulation ensures that your funds are insured and thus protecting you against investing your money with scam businesses.
Comparing binary options trading in the US and non-US countries
Binary options trading in the US is heavily regulated. Brokers that are allowed to offer binary options to US citizens must be licensed and regulated by either the Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC). As such few brokers from outside the US offer their services to American citizens.
Binary options trading outside the US is also heavily regulated. However, there still exist brokers that offer their services without having a license or being fully regulated. Some of the well known regulating bodies include Cyprus Securities and Exchange Commission (CySEC) and, Australian Securities and Investment Commission (ASIC). Countries such as
Israel and Canada prohibit binary options trading.
In the US, binary options are typically offered byexchanges. These simply provide a platform where a willing buyer and seller meet to trade options. Exchanges earn money by charging a small fee on every trade entered. One of the popular exchanges operating in the US is Nadex. It’s regulated by the CFTC.
Outside the US, binary options are usually offered by individual brokers. Brokers earn money by calculating a percentage difference between what they pay out on winning trades and what they deduct on losing trades. Some brokers will also charge fees and commissions on trades and individual trader accounts.
The price of binary options for both brokers and exchanges in all regions of the world are quoted between 1 and 100. This price fluctuates throughout the trade period. The price fluctuations are what make it possible to earn profit or loss on a trade.
Also, traders will always know the profit or loss potential of every trade regardless of the broker they’re investing with. The profit and loss are capped at $100 and the invested amount respectively.
Many exchanges and brokers from all over the world also offer special tools that allow traders to minimize losses or close in profits. These include stops and ability to exit a trade before the expiry period. In some instances, the broker might deduct a small fee for exiting a trade before it
Advantages of binary options trading
One of the main advantages of binary options trading is that you’ll know the potential profit or loss. Every trade usually has two potential outcomes. If the trade is successful, you’ll earn a fixed profit. If the trade isn’t successful, you’ll lose your investment. This makes it easy to identify trades where the profit potential is higher than loss potential.
Another advantage is that many brokers won’t charge any commissions or fees on trades entered. This allows you to keep as much of your earnings as possible. However, brokers vary so it’s important that you choose a broker that doesn’t impose fees or commissions on your trades. Some brokers will even cover the transaction fees that you might be charged by a payment
processor when depositing or withdrawing funds from your account.
Trading binary options is also quite simple. All you need to do is analyze a particular financial instruments price movements and speculate whether the price is going to rise or drop over a specific time span.
As a binary options trader, you can invest as little as $1 on a trade that involves an instrument that’s worth much more than this amount. There are no liquidity concerns since you don’t actually own the underlying asset.
Many binary options brokers are offering a wide range of useful tools and features that make it easy to keep track of the financial markets, manage your account and try out different trading strategies. These usually come at no additional cost and, are available on their platform.
Finally, binary options trading gives you access to different assets classes available in financial markets across the globe. As long as you have access to your trading account, you will be able to access any market that’s open.
Disadvantages of binary options trading
One of the main disadvantages of binary options trading is that a single loss might require several winning trades to cover. Several losing trades can essentially drain your entire trading account. It’s therefore important that you use a proven trading strategy and carefully analyze a specific instrument’s price movements before entering a trade. And easy way to try out your trading strategy is through a demo account where you don’t have to risk your own money.
Many brokers operating outside the US are unregulated. Investing your money with such brokers doesn’t guarantee that your money is insured. We always advise that you carefully research a broker before opening an account with them.
Binary options trading is an easy way to earn a fixed return by speculating on a financial instruments price movements. It’s one of the best
ways to start trading financial instruments without having to invest a huge amount. There are many brokers and exchanges to choose from both in the US and in other countries. Regulators across the globe have made efforts to control protect traders from scam brokers by licensing and keeping an eye on legit brokers. However, the number of unregulated brokers operating outside the US remains high.
Trading in binary options has several advantages that include low capital requirements to get started and, easy access to global financial markets. As with any other market that involves trading financial instruments, binary options trading involves some risks. A single losing trade might require several winning trades to recover. Even so, many traders are making money in this market by adopting proven trading strategies and using available broker provided tools.
If you want to start trading binary options, it’s important that you first have a good understanding about how financial markets work and take time to find a reputable broker.
A Guide to Trading Binary Options in the U.S.
Binary options are financial options that come with one of two payoff options: a fixed amount or nothing at all. That’s why they’re called binary options—because there is no other settlement possible. The premise behind a binary option is a simple yes or no proposition: Will an underlying asset be above a certain price at a certain time?
Traders place trades based on whether they believe the answer is yes or no, making it one of the simplest financial assets to trade. This simplicity has resulted in broad appeal among traders and newcomers to the financial markets. As simple as it may seem, traders should fully understand how binary options work, what markets and time frames they can trade with binary options, advantages, and disadvantages of these products, and which companies are legally authorized to provide binary options to U.S. residents.
Binary options traded outside the U.S. are typically structured differently than binaries available on U.S. exchanges. When considering speculating or hedging, binary options are an alternative—but only if the trader fully understands the two potential outcomes of these exotic options.
Now that you know some of the basics, read on to find out more about binary options, how they operate, and how you can trade them in the United States.
U.S. Binary Options Explained
Binary options provide a way to trade markets with capped risk and capped profit potential, based on a yes or no proposition.
Let’s take the following question as an example: Will the price of gold be above $1,250 at 1:30 p.m. today?
If you believe it will be, you buy the binary option. If you think gold will be below $1,250 at 1:30 p.m., then you sell this binary option. The price of a binary option is always between $0 and $100, and just like other financial markets, there is a bid and ask price.
The above binary may be trading at $42.50 (bid) and $44.50 (offer) at 1 p.m. If you buy the binary option right then, you will pay $44.50. If you decide to sell right then, you’ll sell at $42.50.
Let’s assume you decide to buy at $44.50. If at 1:30 p.m. the price of gold is above $1,250, your option expires and it becomes worth $100. You make a profit of $100—$44.50 = $55.50 (minus fees). This is called being in the money. But if the price of gold is below $1,250 at 1:30 p.m., the option expires at $0. Therefore you lose the $44.50 invested. This called out of the money.
The bid and offer fluctuate until the option expires. You can close your position at any time before expiry to lock in a profit or a reduce a loss, compared to letting it expire out of the money.
A Zero-Sum Game
Eventually, every option settles at $100 or $0—$100 if the binary option proposition is true and $0 if it turns out to be false. Thus, each binary option has a total value potential of $100, and it is a zero-sum game—what you make, someone else loses, and what you lose, someone else makes.
Each trader must put up the capital for their side of the trade. In the examples above, you purchased an option at $44.50, and someone sold you that option. Your maximum risk is $44.50 if the option settles at $0, and so the trade costs you $44.50. The person who sold to you has a maximum risk of $55.50 if the option settles at $100—$100 – $44.50 = $55.50.
A trader may purchase multiple contracts if desired. Here’s another example:
- NASDAQ US Tech 100 index > $3,784 (11 a.m.).
The current bid and offer are $74.00 and $80.00, respectively. If you think the index will be above $3,784 at 11 a.m., you buy the binary option at $80, or place a bid at a lower price and hope someone sells to you at that price. If you think the index will be below $3,784 at that time, you sell at $74.00, or place an offer above that price and hope someone buys it from you.
You decide to sell at $74.00, believing the index is going to fall below $3,784 (called the strike price) by 11 a.m. And if you really like the trade, you can sell (or buy) multiple contracts.
Figure 1 shows a trade to sell five contracts (size) at $74.00. The Nadex platform automatically calculates your maximum loss and gain when you create an order, called a ticket.
Nadex Trade Ticket with Max Profit and Max Loss (Figure 1)
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