For a long time Binary Options have been very popular in Singapore and they still are, but the increasing number of complaints determined the Monetary Authority of Singapore (MAS) to issue a complex warning regarding the risks of this trading instrument, especially when dealing with an unregulated binary options brokerage. Next we will go into a bit more detail to see what the MAS warning is all about.
Reasons For The MAS War Against Binary Options
On 14 March 2017, the Monetary Authority Of Singapore (MAS) issued a warning, which was prompted primarily by the increasing number of complaints from investors who have suffered losses directly linked to binary options trading, due to fraudulent actions of brokers. The MAS also noted the presence of many unregulated brokerages, or brokerages operating in the country without being located in it, thus making regulation and supervision difficult. The MAS warning follows a similar one, issued by the Singapore Police in December 2016, that noted a “sharp rise” in scams involving binary options and investors losing more than 1 Million USD combined. (Source: ChannelNewsAssia)
The Singaporean regulator noted and warned that brokers are using catchphrases like “trading with zero risk”, “trading amounts of as little as $1”, or “profit payout of 500% per trade”, to attract more customers and to determine them to invest, making them believe that Binary Options are instruments with very low risks and very high rewards. In fact, these are speculative instruments and are open to investment risks, just like any other similar product. This means that even if the broker is 100% legit and trustworthy, there’s still a high risk of losing your entire investment due to bad decisions taken in the market (trading in the wrong direction, using poor money management, etc.).
The warning also mentions that investors from Singapore, who choose to trade with unregulated platforms located outside of Singapore, will not benefit from protection because they will not have access to avenues for dispute resolution. Clearly, if an entity is not regulated by the MAS, investors cannot expect the MAS to solve their problem because said regulator doesn’t have jurisdiction in, Cyprus or Belize or anywhere else than Singapore. They are basically saying: If you want to do business with unregulated entities from outside our jurisdiction, know that we will not be able to help in any way.
What Singapore Investors Should Do To Protect Themselves
I think that whoever wrote the text of the MAS warning should come work with us at BOTS because the first thing they mention in their section regarding investor self-protection is “if the touted ease of making significant profits sounds too good to be true, it probably is”. Well, that’s what we’ve been saying all along, so Thank You MAS for agreeing.
An important step before investing is to check if the brokerage is regulated by the Monetary Authority of Singapore. For a full list of regulated entities, investors can access the MAS Financial Institutions Directory but they should also check MAS’ Investor Alert List for a non-exhaustive list of entities that may have been wrongly perceived as licensed or authorized by the MAS.
Last but not least, the Monetary Authority of Singapore advises investors who suspect that fraud is involved with entities or platforms offering binary options, to contact the Police online, to file a report through the Electronic Police Centre or to physically go to a Police Centre.
To read the full text of the MAS warning, access source: Monetary Authority of Singapore 14 March 2017 Warning.
Conclusion: What Will Be The Effects Of This Warning?
I think that the immediate effect will be that fewer residents of Singapore will invest in Binary Options brokerages that are not properly regulated. This is a good thing and we’ve been saying it all along. Don’t invest with shady brokers, check to see if they are authorized and licensed by a proper Authority, inform yourselves before giving your money away. This warning issued by the MAS may be just the first step and the next may very well be the complete ban of Binary Options in Singapore. Unfortunately, the actions of some brokerages give binary options a bad name and I’m sorry to see that, because binaries as a trading instrument are not a scam but if certain brokerages are not taken out of business, people will perceive the instrument itself (BO) as a scam and that would be a mistake.