Binary trading and the Gambling Commission
Binary options could be described as a financial vehicle that bridges the gap between sports betting and more traditional investment. That position however, has caused the authorities in many countries a few problems when it comes to deciding exactly who monitors binary option brokers. As governments dragged their feet, the sector went unregulated and consumers suffered.
With the early steps towards full regulation taking place back in 2008 with CySec in Cyprus, binary options began to receive more attention. Once the Cypriot government recognised binary options as a financial investment vehicle, the rest of the EU was compelled to allow brokers to operate under those terms.
In the UK however, while the authorities were obliged to allow brokers to operate here, under CySec authorisation, they themselves asked the Gambling commission to monitor binary brokers. The gambling commission appeared to be extremely reluctant to take on that responsibility however, and while the official line might be that the commission oversee binary options operations, there seems to be very little actual monitoring.
Now however, there is some real momentum behind the rumours that responsibility for binary option regulation will be passed to the Financial Conduct Authority (FCA). The FCA replaced the FSA (Financial Standards Authority) and already authorise businesses looking to trade in the financial sector (including banks, financial advisors and brokers among others).
With the Gambling Commission so disinterested, involvement from the FCA would be a real boost to the sector. While the CySec regulations have gone some way to clearing up some of the less responsible brokers, the FCA will bring a whole new level of consumer confidence to the industry. In addition to more stringent regulation, they will also provide much greater reassurances regarding the security of clients funds.
Impact on Binary Options brokers
Some of the newer, or larger, brokers to the industry, such as Option888 and IQOption will already have plans to ensure they are regulated, and the more established brands will also be keen to be authorised by the FCA. They recognise that their businesses will grow, as investor confidence grows. One firm, IG Index, is already regulated by the FCA. This is due to them offering financial products that already fall within FCA control. Better regulation of the binary options sector is beneficial for every ethical and responsible operator.
While the question of whether binary options are gambling or investing goes on. It would appear that the authorities are now prepared to view them as trading instruments, rather than outright bets – but doubtless the debate will go on for some time yet.