Binary Option Regulation Is Expanding
Binary options regulation is not limited to CySEC and the CFTC, although sometimes it may seem this way. Aside from regulators in individual EU nations there is a growing presence by the Japanese FSA, Austrialia’s ASIC and even the New Zealand FMA. In recent months it seems as if a couple of newcomers have hit the scene as well which begs the question, if regulation is expanding is it really doing anything? To find the answer to that question and more the first thing to do is understand just what these new regulators are and what it is they are doing.
More Binary Options Regulators Than Every
Three different agencies have popped up, one has been around for a while and recently regained spotlight. All three appear to be legit and all give reason for pause. The first and perhaps most trustworthy is new regulation from Vanuatu. If you don’t know, Vanuatu is a small island in the Pacific, very beautiful, and home of the mind altering beverage kava. This small country has undertaken regulation, at least registration, of binary and forex businesses through the VFSC, the Vanuatu Financials Services Commission.
On the surface it appears to offer safety for traders but it may be the brokers will receive the most benefits. It only takes 3 months to get certified and capital requirements are incredibly low, only $2,000. In exchange for basing business there brokers pay no income taxes and receive other benefits while traders receive little in the way of protections.
The Financial Commission, FinaCom, is another would-be mediator of disputes between traders and brokers. It first popped onto the radar screen a few years ago and recently did so again. Back then I thought it was a scam, it had the look of one just like the FMRCC. This time I’m not so sure but still not fully convinced of its worth. The FinaCom is a third party service that brokers can elect to join. Members receive a certification and become subject to FinaCom’s ruling’s should a dispute arise. Each member pays into a compensation fund, the money is then used to settle disputes in the case an agreement can not be reached between the trader and the broker. Traders are able to file claims but must do so in a timely manner, after first seeking satisfaction from the broker.
By no means is there definitive proof of legitimacy but there are a couple signs FinaCom may have good intentions. The first is transparency, they list a physical address along with information about the directors and members. So far they have only 18 members but it is the names on the list that make it seem like there could be more here than another regulation scam, names like Alpari, Ibinex and other top forex brokers but only one binary broker.
Another Fake Regulator?
Another agency, the Financial Market Relations Regulation Center, is sprung up in the Russian Federation. It tries hard to look like an official regulator but it isn’t. It is a third party, “non-commercial”, intended to regulate the quality of services provided by brokers. According to the website it regulates brokers, compliance is compulsory, however jurisdiction is questionable. From what I can tell compliance is compulsory, membership is elective. If a broker choose to join they participate in a compensation fund intended to help traders, all the FMRRC does is mediate disputes.
While it is a bonus for a broker to utilize such a service there are a couple of red flags with this one. For one, only 25 organizations participate and none are listed on the website. For another, there is no physical address listed, not a good sign when trying to validate internet information. These guys may be legit but I have to say it looks more like a scam than not.
Is Spreading Regulation Doing Anything?
Regulation of binary options and its spread throughout the world is doing something and that something is good. The problem is that not all regulation is helping and that some of it may be part of an elaborate scam. Where it is not helping is places like Vanuatu where a broker can be opened and regulated in months with little to no protections for traders, the end result in many cases legalized scamming. The real problem is where regulation scams persist, fake regulators or third party mediators may seem like a good idea but without assurances of their own are highly suspicious at best. The only truly effective regulators remain those in the developed world such as the CFTC, CySEC and Britain’s FCA.