The binary options industry is full of nothing if not controversies. The very nature of binary options trading is still a hot debate subject, with some stubbornly claiming that this financial industry is more akin to gambling than a legitimate financial industry.
The presence of shady brokers and trading systems has only served to make the problem worse. But what it probably more confusing is how this industry is regulated.
You see, it is understandable, even if not acceptable, that an unlicensed broker would engage in unethical business conduct. But what of those licensed brokers who use every dirty trick in the book to fleece their clients? What does this say about the way this industry is regulated around the world?
I have been asking myself these questions for quite a while now. And well, after a bit of research, here are some things I found out.
Some Regulators Are Laid Back
Although some brokers have verifiable regulation for their services, they still manage to visit all sort of ills upon their clients. It makes you wonder, why would a regulator let these companies ‘get away’ with such unfair conduct? A good example is the world famous financial regulator, CySEC (Cyprus Securities and Exchange Commission).
Many regulated brokers accused of some wrongdoing or another have a CySEC license. In fact, the financial watchdog has had to bear the wrath of people who have been wronged by some of the brokers it has licensed. The problem is that such regulators are not quick enough in their response to violations committed by the brokers they regulate, if at all.
In a country like Cyprus, the regulator seems highly motivated to ensure that it makes the country the go-to destination for binary options regulation, which is probably why it is not as vigilant in cracking down on rogue operators. Unfortunately, this leaves clients vulnerable since such companies can violate their clients’ rights for months on end and even manage to get away without facing any serious legal consequences.
Some Countries Insist On Local Regulation
Based on the above findings, this should hardly come as a surprise. A few countries have realized that regulation from other countries is hardly a deterrent against some brokers acting unethically at the expense of their residents. Countries like France, Japan, Canada, and the US come to mind.
In these countries, any broker, however stellar its reputation, will be blacklisted in the country for simply not having local regulation while promoting its services.
To an extent, this is a good thing because companies counting on the laxity of their regulator to shortchange their clients can be kept from doing more harm than necessary. But, should you use a broker from a country with a prohibitive regulatory framework to avoid getting scammed? Probably, but it might present additional challenges. For one, unless you are a resident of that country, you may not enjoy the protection of the local regulator.
Besides, such companies usually have local operations within such countries regulated by the local authorities, while they put their other global operations under a different regulator. Then there is the issue of permissible binary options contracts. For instance, if you favor 60-second options, you will not be able to use a broker that uses the Japanese regulator.
In the US, the law requires that binary options contracts are presented in a particular way, and you may find this to be different and incompatible to what you are used to when using brokers licensed elsewhere in the world. Of course, such a broker might not even be open to membership from your country, which may disqualify you for their services and safe legal environment altogether.
Some Countries Do Not Even Recognize Binary Options
In many countries around the world, the law does not recognize binary options. And something that the law does not recognize is also something it cannot properly regulate or even license. In such cases, you would have to hope that the regulator the broker uses while offering its services to you as a resident of such a country offers adequate protection to you as well. But with some brokers seemingly using velvet gloves to deal with straying brokers, you may not be very safe.
So, What’s The Solution?
As you can see, regulation says very little about the ethical integrity of the broker you are dealing with. Which raises the question, is regulation enough to determine that a broker will not screw you over at some point? The simple answer to this question, unfortunately, is no. Some regulators will not follow up on such misbehavior, and you could end up losing your money.
Even when you consider that there are some very strict regulators out there, your prospects of finding a good broker might still not be that good. For one, your options as far as binary options trading is concerned might be considerably limited. Then again, such local licensing might not protect a foreigner like you. Which leaves you with one option:
Consider The Broker’s Reputation. Believe Me, It Counts For Something
The questions to ask here include: what is the history of the broker, how long has it been around, what does the community think of its services? For instance, some of the most reliable brokers in the industry have CySEC licensing; yet their ethical behavior has stood the test of time.
At the same time, some brokers, despite being under the same licensing body, have caused their clients untold suffering because they are scammers. So, before you give your money to the wrong ‘fully-regulated’ broker, look at its reputation carefully; this could save you from lots of hurt down the road.
It’s not that regulation counts for nothing. As a matter of fact, licensing could mean a lot, especially if you come from a country where binary options are recognized and a vigilant local regulator insists that all brokers possess local licensing. But if you are beyond that form of protection, you will have do your homework and see if the broker can be trusted to act fairly towards
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