What is a regulator in binary options area?

During the early days of binary options trading it was actually considered as gambling and as such, it was not touched by actual financial regulators. Binary options only started to become regulated in 2008 to 2009. However, back then, being a regulated binary broker did not really carry much weight.

Right now, though, having a license from a regulator is one of the first things traders look for when choosing a broker they will trust enough to put their money in. As in every form of trading, a regulator is an organization that sets the rules, imposes them and makes sure that the brokers under them follow these regulations.

What is the role of regulators in the operation of binary options brokers?

We already know what a binary options regulator is but understanding what they are is another thing. For that, we need to recognize what they do on a deeper level. Regulators control the whole process in binary options trading and that includes the traders or users as well.

For brokers

As we have pointed out earlier, nowadays traders mostly choose brokers who are regulated. Because of that, it is best for binary options brokers to apply for regulations though it is not entirely compulsory. Another thing worth pointing out is that the regulators will have the final say on whether they will regulate a broker or not.

Yes, there are times when regulators refuse to regulate a broker, most of the time that means that the broker is not up to their standards. The rejected broker may still operate but that means that being regulated already serves as some sort of guarantee that a broker is legit, earning the trust of more traders.

Regulators, as we have said, set the rules and make sure that the brokers follow them to secure and fair trading market. For brokers, being regulated means that they must follow every rule and guidelines set by the regulator. At the same time, since traders will trust them more than brokers that are not regulated, they will attract more users.

For users

With scams floating just about anywhere we look, people tend to be more cautious about where they put their money on these days. That is exactly why traders look for regulated brokers. It is common sense to check everything about a broker first before trusting them with your money, right?

Regulators make that easier for users. Traders can check, at their own convenience, with regulators to verify the information listed on the platform of a binary options broker, especially when it comes to the broker’s license. Regulators also ensure that brokers don’t cheat their customers.

Because regulators oversee the proceedings of the brokers under them, traders can rest assured that these brokers follow the law. Regulators hold each broker up to a certain standard and that lessens the risk of fraud and scam. Brokers that are regulated are also obliged to keep the funds of their customers on a separate account.

Basically, on the part of users, regulators protect their rights, see to it that their money is protected and that everything is clean and fair. If against the efforts of a regulator, a regulated broker breaks any rule, a trader can send their complaint deftly to the regulator.

Organizations that regulates the operation of the majority of binary options brokers

CySEC

CySEC or the Cyprus Securities and Exchange Commission, the agency responsible for financial regulations in Cyprus, is probably the most prestigious institution when it comes to regulating in binary options. It was founded in 2001 and since Cyprus, the location of its headquarter, is part of the European Union, CySEC complies with European standards.

Aside from that, binary options brokers with a license issued by CySEC can operate in all the member countries of the European Union. CySEC regulated brokers are not allowed to accept traders from the United States of America.

How to check CySEC License

Below is our video that guides how to check CySEC license. In this video we check a broker of OptionBit. This binary options is operating on two domain: www.optionbit.com and www.optionbit.eu. You will realize that only one domain is regulated by CySEC. Now let’s start.

FCA

The Financial Conduct Authority or FCA is the responsible agency when it comes to the financial sector in the United Kingdom. For those who are not aware, back in the day (by that we mean the last decade) binary options trading is considered as gambling in the UK and as such was overseen by their Gambling Commission.

Fortunately, now binary options brokers that operate in the UK are regulated by the FCA. The organization, though, is separate from the government. Brokers whose licenses are issued by the FCA are only allowed to operate in the UK.

ASIC

ASIC, which stands for Australian Securities and Exchange Commission, is the Australian government’s financial regulator. They are responsible for the enforcement of rules and laws in the financial sector. The ASIC is the regulator of binary options brokers in Australia. It was also known before as the Australian Securities Commission or ASC.

Binary options brokers that are regulated by ASIC, like in the case of CySEC, are not allowed to accept customers from the United States of America.

MiFID

MiFID or the Markets in Financial Instruments Directive is not exactly a regulator but instead is a regulation in and on itself. This European Union legislation is used for the regulation of enterprises involved in trading financial instruments and that includes binary options brokers. MiFID is applied across the EU.

The purpose of the MiFID is to create a standard that would be followed for the required mandatory disclosures for certain markets. It also encourages a significantly higher level of transparency in the financial markets where it is implemented.

FMRRC

The FMRRC stands for Financial Market Relations Regulation Center. It is the regulatory body for the financial market in Russia founded by a Russian broker and is in no way connected to the government of Russia. The FMRRC, in fact, is a non-commercial private organization.

The whole institute runs on its own framework and this is created by their own team of independent experts on the field. All of the funds that the FMRRC use are raised from the membership fees from the brokers they regulate as well as from different transactions from the said brokers.

IFSC

The IFSC or the International Financial Services Commission is the financial regulatory commission of the government of Belize. Just like the other financial regulators, the task of the IFSC is to enforce the rules in the financial market and regulate all of its participants along with giving out penalties and sanctions as needed. Its headquarter is in Belize City, Belize and it is founded in 1999.

A lot of online brokers are licensed by the IFSC and this license is acknowledged internationally.

VFSC

VFSC, which stands for Vanuatu Financial Services Commission, is the agency tasked with regulating and overseeing the financial sector in the Republic of Vanuatu. The VFSC also acts as a registrar of companies, organizations, and unions among other things. They responsible for the development of Vanuatu’s financial industry.

Conclusion

It is easy to understand the reluctance of people to trust just anyone with their money. The moment you put your money on binary options trading, you already opened yourself to the risk of losing it. The only way you can really protect yourself is to make sure that the broker you choose will not swindle you out of your fund.

What better way to be guaranteed of this than to only open an account on brokers who are legit and regulated? And while you are at it, choose a broker regulated by organizations that have proven track records like CySEC, FCA, and ASIC.

Thank you for taking the time to read this article. Please feel free to leave a comment so that we can continue to improve!

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