Binary trading regulation and legislation


A fixed return is offered to investors based on specific outcomes. If the outcome is achieved, the investor receives a fixed cash or asset return on their investment, if not, the initial investment is forfeited. For example, an investor may make an investment based on the valuation of a currency. He or she may specify whether the exchange rate will be above or below a certain level on a fixed maturity date. If, on the date of maturity, the rate is indeed higher than the specified value, the broker pays the investor based on the pre-determined percentage of investment pay out.

If it closes lower, the investor forfeits his or her initial investment. Malta later followed suit, moving binary options brokerage regulation to its financial services authority rather than its gambling board. In the early days of binary options trading, funds were not held in trust accounts and no outside regulator monitored them or ensured that transactions were fairly conducted.

In , CySEC announced that binary options would be considered as financial instruments and would be regulated accordingly. All Cyprus based binary options brokers were required to register their operations within 6 months of the May announcement.

In , CySEC began to take decisive action against any brokerages in Cyprus that had not yet registered. They suspended the licenses of binary options brokers who failed to comply with codes of financial best practice. Hefty financial penalties were exacted from certain binary options brokerages. These measures served to emphasise that CySEC are serious about the regulation of binary options brokers in Cyprus.

Today, CySEC closely controls Cyprus based regulated binary options brokers, ensuring that regulations are adhered to. They will also levy penalties, issue warnings and withdraw licenses, if and when binary options brokers are found to be in contravention of the relevant legislation. However, their initial crackdown was sufficient to make traders aware that contraventions would not be tolerated. CySEC also welcomes public input. If, on the date of maturity, the rate is indeed higher than the specified value, the broker pays the investor based on the pre-determined percentage of investment pay out.

If it closes lower, the investor forfeits his or her initial investment. Malta later followed suit, moving binary options brokerage regulation to its financial services authority rather than its gambling board. In the early days of binary options trading, funds were not held in trust accounts and no outside regulator monitored them or ensured that transactions were fairly conducted. In , CySEC announced that binary options would be considered as financial instruments and would be regulated accordingly.

All Cyprus based binary options brokers were required to register their operations within 6 months of the May announcement. In , CySEC began to take decisive action against any brokerages in Cyprus that had not yet registered. They suspended the licenses of binary options brokers who failed to comply with codes of financial best practice. Hefty financial penalties were exacted from certain binary options brokerages. These measures served to emphasise that CySEC are serious about the regulation of binary options brokers in Cyprus.

Today, CySEC closely controls Cyprus based regulated binary options brokers, ensuring that regulations are adhered to. They will also levy penalties, issue warnings and withdraw licenses, if and when binary options brokers are found to be in contravention of the relevant legislation.

However, their initial crackdown was sufficient to make traders aware that contraventions would not be tolerated. CySEC also welcomes public input. Complainants need not be citizens of Cyprus.

Although investment in binary options is popular in the EU, it continues to be a grey area in the US. It is not legal for US citizens to purchase binary options from any other source. The current stance in the US is already considerably more lenient than it initially was, and it is to be assumed that in the future, they will follow the EU in recognising Binary Options as bona fide financial instruments regardless of their source.