Japanese FSA Binary Options Regulation – News and Updates

Japanese Binary Options Regulation

New regulations from Japan’s FSA are groundbreaking and could lead to an international standard for binary options. The country has turned to the 0-100 style of binary trading as a means of providing a level playing field and protecting traders interests.

 

 

Japan Regulates Binary Options

What does this mean for binary options? The biggest and most fundamental change is the type of trading allowed. In Japan there will no longer be the standard high/low binary trading. They have opted for the 0-100 type of trading, if you are  not familiar with that you need to get up to speed. This change is why I believe the FSA is leading the way toward international regulation. One other prominent options regulatory agency chooses to use this style of option; the U.S. CFTC. That’s right folks, binary options in Japan are almost identical to U.S. regulated binary options. There are several differences but the framework is the same. As of now the only other broker that I know of currently using this style is AnyOption, another major innovator of binary trading.

 

 

 

What Are 0-100 Options

In Japan they will be called Binary 100 option by Tradelogic, a major binary options platform provider.  These options are incredibly versatile and can either be bought or sold, unlike the standard spot variety of binary options. If you buy the option and it closes in the money you profit the difference between the purchase price and $100. If it doesn’t you lose the investment. If you sell the option and it closes in the money you profit the sale price. If not you lose the difference between the sale price and $100. Another major difference is the strike price. Strike prices will be predefined by the broker and standardized across the industry. The price of the option will move between $0 and $100 (in local currency) based on the price of the asset relative to the strike price. This means that for either transaction type, buy or sell, there will be an option that is in the money, out of the money and at the money. Options will also be sold by contract. Each contract will be equal to $0 or $100 at expiration. The difference for traders used to trading spot is that you will no longer enter orders by trade size. If the options are quoted at $32 a contract and you want to trade $100 you will have to choose 3 contracts for a net debit of $96.

 

Other regulations include cautions against promoting excessive speculation, how brokers will make they money, maximum trading amounts and trading time. Specifically brokers have told not to offer gifts such as bonuses or other rewards that encourage traders to deposit money. This means that advertising methods will change drastically in Japan. As for profits, options will now be offered with a bid/ask spread; traders will buy the ask and sell the bid. Brokers will profit the difference and not a percent of the trade as before. This means more money in the pockets of traders. Maximum trading amounts are meant to curb excessive trading and behavior that could ruin and account. Maximums will be set for each account based on its value and brokers will be responsible for enforcing them.

 

 

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