Binary Options Regulation, Game Changing Times!
Times are changing when it comes to binary options regulation. Recently, a paper about marketing practice in initial public offering was issued by Australian Securities and Investment Commission. This comes on the hill of some countries completely banning the advertisement of binary options as financial trading and specifically, binary options have become a global hot topic. It is, however, interesting to see how Australia responds to this growing issue.
Though the report named REP 494 Marketing practices in initial public offering is majorly taking IPO’s into consideration, similar practices are deployed in binary options trading too. Apart from France, a lot of other countries and regulatory agencies like CySEC has also considering possible changes in how traders should be treated.
Different aspects of Binary Options Regulation
Several aspects of investor targeting are considered questionable according to the recent report by ASIC. The report listed telephone calls among the most complicated and unregulated marketing tool as they are hardly monitored or controlled properly. Most companies are known for not reviewing conversation but are only concerned about the final result. With the same issue creeping into binary options, CySEC is seriously considering making it compulsory that all customer support agents use their real identity when prospecting new investors. However, it is important to that these guidelines are not applicable to brokers that are not unregulated.
In addition, ASIC noted that misleading communication and social media post are also some very critical issues prevalent among binary options brokers. Unfortunately, these new regulations seem to target regulated brokers who might make mistake while unregulated brokers have it all good as they can’t be prosecuted.
The ASIC report also noted the fact that the effect of these unethical practices on trading behavior was not probed. The report states: “In раrtісulаr, wе note оur report fосuѕеѕ lаrgеlу on the mаrkеtіng рrасtісеѕ оf fіrmѕ but dоеѕ nоt explore іn any dеtаіl thе impact оf thеѕе practices оn investor dесіѕіоn making. There іѕ ѕсоре fоr more work іn lооkіng аt thе аrеа оf іnvеѕtоr bеhаvіоr, what іnfluеnсеѕ іnvеѕtоr dесіѕіоn mаkіng, аnd аррlуіng the іnѕіghtѕ оf bеhаvіоrаl есоnоmісѕ.”
Advertising and Binary Options
As mentioned above, AMF in France chooses to ban all forex and binary options advertisement after a protracted public discussion about it. Belgium also followed suit by completely banning all binary option trading activities. Israel also followed the same route recently by banning binary options within it borders.
Potential for Scamming
With unregulated binary options brokers flooding the market, it has become a lot more difficult to track and sanction the companies behind those unregulated brokerage firms. This has made possible the presence of bold unregulated binary options brokers in the industry, leaving traders exposed and vulnerable to scams and super high-risk trading.
In the event of a scam or unethical behaviors by brokers, traders can’t count on local regulators, as they are often helpless and devoid of means to combat scam brokers run operated my different companies as the case may be. ASIC recently announce it resolve to prosecute people responsible for TitanTrade scam. This scam is the most prevalent scam in the industry; however, combating it will be a lot more complicated and time-consuming.
Will Binary Options Regulation help Protecting Binary Traders?
Regulated binary options brokers have a huge responsibility of complying with all rules and regulations put forward by regulated agencies. Though they offer safer and better trading condition for traders, they are often under a lot more pressure and scrutiny by regulators controlling documentation and other crucial aspects of trading.
Generally, this means more protection for traders in a safe and regulated setting, however, it also means brokers being less motivated to become registered and licensed for regulated financial trading.