With Binary option trading being a relatively new and easy mechanism for investors to try and profit from financial market movements, regulation has not been able to keep up with their explosive growth, well that is until now. Slowly various regulatory bodies are trying to bring binary option trading under their financial regulatory umbrella, this however is still causing confusion due to the fact that different jurisdictions classify them differently. In Cyprus the regulatory custodians the Cypriot Securities and Exchange Commission (CySEC) have decide to bring binary options under the Investment Services and Related Activities Law of 2007-2009.Prior to this move by CySec the binary option market was totally unregulated within the European Union. This move by the Cypriot regulators has also put the binary option market under the scope of the Markets in financial Instruments Directive (MiFID). With the seemingly successful move by the Cypriot regulators other countries like Malta and Japan are following their lead. In Malta binary option trading and historically been under the jurisdiction of the Lotteries and Gaming Authority (LGA), but the Maltese Financial Services Authority (MFSA) are working on bringing under is regulatory umbrella under the provision of the Investment Services Act (ISA). Japan one of the largest markets for binary options has placed them under the regulatory umbrella of the Financial Futures Association of Japan (FFAJ). There are still other jurisdictions that are happy for binary options to stay under the regulation of gambling rather than financial services, this is the case in the United Kingdom and the Isle of Man and are making no apparent moves to change to the Cypriot way of thinking.
For traders regulation has to be top priority when opening an account and the moves by various jurisdictions can only be a good thing. Client asset protection is the number one priority and a regulated firm will have strict client money rules to adhere too, such as keeping client money ring fenced away from day to day operating costs. Firms will have to carry out better ID checks on traders, this will help to eliminate certain types of fraud. Hopefully this new regulatory environment will deter the more unscrupulous firms from setting up operations allowing the legitimate operations to grow without being tarnished by unregulated and possibly dodgy operations.
To make things easier for all traders all regulated and licensed binary option brokers should be instructed by their regulator to clearly show on their home page they are regulated and in which jurisdiction along with their license number and a link to the regulators website. This would make it easy for individuals to check and verify and would provide a certain amount of comfort when signing up. Brokers if genuine should have no issues about clearly stating on their website that they are regulated after all they have spent time and money to get this status. With the multiple jurisdictions available for binary option brokers to become regulated in, and with them all offering differing levels of protection for traders it will still not be easy but the binary option industry has to work at this and still has a way to go to get rid of the somewhat tarnished image which has been caused by certain unregulated entities in the infancy of this industry.