Binary Options Regulation – Strong Increase in Enforcement and Law
We know how important regulation is, without regulation, any market will turn into the wild west in no time. With binary options we are witnessing a strong increase in enforcement and updating of laws and documents that help regulators in strengthening the current regulation frameworks and eventually – enforcement can push the cowboys out of the market.
The disturbing thing that we are also witnessing is the bans employed on the whole market by some European countries that could have influenced a true regulation and enforcement on the market.
“Canada oh Canada”
In Canada the OSC added yet another binary options broker (B4Binary) to it’s warning list this week but posting warnings has nothing to do with regulation and enforcement, it is actually useless as %99 of Canadian consumers don’t even read any of these warnings.
Lack of Cooperation Between Countries
Furthermore who is to say the B4Binary and CTOption brokers have even done anything wrong? The fact that they are not oficially regulated by the FCA or by the OSC will not stop local Canadian and UK consumers from using their products, because the FCA and OSC have refused to regulate the market, this means that someone from the UK and someone from Canada signed up on these brokers websites and ended up getting the brokers reputation potentially ruined, just because the FCA and OSC refuse to regulate binary options.
Maybe, just maybe, B4Binary and CTOption used indecent practice, but we can’t really know! Maybe Canada and UK could use more transparency and add information about numbers of local consumers complaining ect’ ect’..
Good News from FMA and ESMA
In Europe and New Zealand this week, on the flip side, we can see that regulators such as the New Zealand FMA and the European Securities and Markets Authority (ESMA) are getting noticed by strengthening regulation and enforcement for the safety of future consumers. The ESMA is working on the “MIFID II systematic internaliser regime”.
MiFID II / MiFIR have an important role in global regulation of the binary options market.
In new Zealand the FMA Financial Markets Authority has added a large sum of funding to its coffers for strengthening of current and future regulation plans.
Enforcement is what brings real change. Before enforcement though, regulation framework is needed and this week New Zealand and Europe have come out on top. The USA has always been known for its strong enforcement stance in all things and this is why they have not had to enforce any fines or charges in their local binary options exchanges (NADEX for example).
Local USA brokers are too afraid of the SEC and CFTC to start cow-boying around with their clients and consumers. USA and New Zealand / Australia (ASIC) regulators play hard ball and even use their enforcement on brokers from abroad, bringing fines and charges to European brokers that have used indecent practice and / or solicited customers from their local consumer pools – instead of strengthening cooperation with regulators abroad.
The only real cooperation between countries is in Europe with the ESMA working on MiFID and also there is some cooperation between the UK and the USA as always [see here].
Good News Regarding Cyprus
CySEC has also began to enforce their regulation more and more in recent months, giving large fines to CySEC regulated brokers with regulatory compliance issues. European regulators have not brought any charges or given out any fines to non-European brokers, although it is almost certain that Europeans regularly trade binary options on local USA regulated broker websites or NZ / AU broker websites.
As always, Europe is at the forefront of cooperation and is looking to strengthen the framework for regulators at the moment for future enforcement. Unregulated brokers from the EU / Middle East / Russia / Asia ect’ apparently do not fear the EU regulators who are less hard ball and with exception to Cyprus, more prone to just banning / warning / or working on future framework. Bans and warnings do not help, while working on future framework may boost future regulation and enforcement.
CySEC should continue to boost enforcement and continue to work in cooperation with the EU.
France, Belgium and other countries that have banned binary options should take note and remove the ban. They should strengthen regulation and work on cooperation with the EU and other regulators around the globe. It does not seem that these bans will be lifted any time soon though.
USA SEC and CFTC should probably mind their own business as they are (as always) trying to force their hand abroad which may not really help in the long run. In Israel the ISA and local law enforcement, in cooperation with law enforcement from the EU and other foreign countries, are preparing to play hardball. There is a ban on binary options in Israel which is pretty much useless without enforcement and is not helping global regulation, only hurting it. But… Israel is preparing all out war on local brokers. This may bring an end to Israels part in the binary options market in whole.
In our opinion Israel should remove their local ban, strengthen regulation and regulatory ties in the EU and USA (like Israel does in all other issues and agendas) and practice strong enforcement of regulations and laws. But this seems too far away to even talk about, with the current all out ban.
New Zealand and Australia should also be minding their own business as they may be undermining the current EU efforts to improve regulation of binary options. NZ and AU regulated brokers seem to be doing a good job with local compliance but also are probably letting consumers from the EU use their services, without said brokers having a local EU license. Like the USA, New Zealand and Australia seem to be playing both sides of the table.
ASIC and FMA, as also the USA, should not be such hypocrites!
The enforcement of regulations should mainly be a local issue for each country and territory, if each and every regulator insisted on improving regulation, enforcing the law and bringing compliance rates up locally, they could then also try to work on building stronger cooperation and ties with regulators from abroad. We would then be able to witness a full 180 degree change in the binary options market. Local binary options firms should not be marketing their products abroad, without consent from their local regulator and regulators from abroad, affirming that they can do so. If regulators worldwide cooperate better and strengthen their local enforcement, we will see better results and outcomes that are aimed mainly at improving consumer experience and profit.