Binary Options – Reliability Report


The Growth of The Binary Option Market

 And so it is, Binary option trading is the new rage among the retail investors; Step aside, Forex. Nevertheless, it was only recently that the binary option market became accessible to the average retail investor. Previously, if a retail investor wished to purchase binary options, he had to go through an intermediary. In addition, the high transactional cost also made binary options an unappealing investment vehicle. All this started to change in the summer of 2008 when the Options Clearing Corporation (OCC) started listing binary options. Shortly after, the American Stock Exchange (AMEX) and the Chicago Board Options Exchange (CBOE) also began to follow suit. With the readily availability of binary options on the traded exchanges, binary options has gained widespread acceptance among retail investors leading to an exponential growth in the binary option market.

Regulations

Although the concept of binary options is fairly simple, the financial regulatory framework governing them is not as clear cut. This is because the binary option market is an Over-The-Counter (OTC) market that spans a global market. Adding to the fact the binary options are a recent market development, there is a distinct lack of clarity and uniformity in the standard of financial regulations among the regulatory bodies that oversee the binary option market. Although the regulations for the binary options market are still in their infancy, we cannot deny the importance of these regulations in helping the safeguard the interests of the retail investors.

For brokers that are operating from the United States (U.S), they are self regulated by FINRA (Financial Industry Regulatory Authority) and by the SEC (the Securities and Exchange Commission. For the U.K, the FSA (Financial Services Authority) is the main regulatory body that have oversight over the financial services sector. As for the European Union (EU), the member states each have their own regulatory body which regulate the financial services sector and follow a standard that is recommended by the EU. For Australia, binary options brokers are regulated by the ASIC (Australian Securities and Investments Commission). Hence, Binary options brokers that are operating from the above mentioned countries have some semblance of financial oversight which tries to ensure that binary options brokers carry out their fiduciary duties toward their clients.

Operational History of Brokers

 

Even as financial regulations are being formulated to govern the financial markets, one shouldn’t solely rely on the fact that a broker is regulated to safeguard one’s investment. For example, the U.S financial market is one of the most tightly regulated financial markets in the world yet the scale of financial fraud that occurred there has never been rivalled by any other countries in the world. The latest example of large scale financial impropriety that occurred on Wall Street was the MF Global case. Rather, one should always bear in mind that regardless of how well a broker is capitalized or regulated, these are just some of the factors that play a part in determining the legitimacy of a broker’s operation. At the end of the day, the best way of protecting one’s investment is to just perform due diligence all the time and ensure that no large sums of money are kept in the broker’s account.

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