See Binary Options Regulation in:
Trading binary options in the U.S. and in offshore markets is quite different. Whereas binary options in the U.S. are strictly regulated and mostly offered on option exchanges such as the Chicago Board
Options Exchange (CBOE) or NADEX, binary options trading in many other countries is mostly offered over-the-counter (OTC) and is sometimes not properly defined by law. Further, many regulated brokers
operating outside the country do not accept U.S. traders.
If you are looking to trade binary options in offshore markets, here are some guidelines to help you learn more about regulations in different markets.
The U.S. is among the biggest binary options markets in the world. Binary options trading in the country begun in 2008 and was largely unregulated. But the U.S. government has increasingly been
enforcing various laws to protect its citizens from binary options fraud and scams. The CFTC (Commodity Futures Trading Commission) and the NFA (National Futures Association) are the two bodies
responsible for regulating the binary options industry in the U.S. Many of its regulations are founded on the Commodity Exchange Act.
It's interesting to note that whereas CFTC does not bar U.S. traders from placing trades with offshore brokers, many regulatory bodies in foreign markets ban their brokers from offering their services to U.S traders. Since many registered brokers in other markets cannot serve U.S. traders, traders who need to access those markets have to make do with unregulated brokers who can accept them.
U.S. brokers offer traders access to exchanges such as Nadex, Cantor Exchange, and the Chicago Mercantile Exchange (CME). Nadex is the biggest and most popular exchange while Cantor Exchange is the smallest and offers the fewest options. Nadex (North American Derivatives Exchange) is a derivatives exchange for retail traders, and is completely regulated by CFTC. If you experience any problems with your broker, you can directly reach Nadex and Cantor Exchange via email while CME can be reached through email and telephone. You can also report any suspicious activity and irregularities to CFTC.
Many brokers operating within the European Union are regulated by the Cypress Securities and Exchange Commission(CySEC). CySEC is amongst the best known derivatives regulatory bodies in the world.
CySEC is obligated to supervise, observe, and control broker activities. CySEC has quite stringent regulations, and even employees of member brokers must pass the commission's perqusition.
CySEC treats all brokers as financial companies, and applies specific rules when it comes to bonuses. The commission demands complete transparency by all its brokers, including having websites with clear Terms and Conditions and information about the risks associated with trading. CySEC has cracked down hard on brokers who use bonuses as blackmail to prevent traders from withdrawing funds as well as those that use false advertising. The commission actively prosecutes and fines brokers who fail to adhere to set guidelines.
Binary options in the UK are still considered a form of betting and regulated by the Gambling Commission. There has been ongoing consultations to classify binary options as a form of financial product
so that they can regulated by the FCA (Financial Conduct Authority). The UK law is, however, yet to enact the necessary legislation to make these changes a reality. In its website, the FCA recommends
that traders in the UK deal with brokers who are:
Binary options in Canada are somewhat of a grey area. Since May 2015, there are no registered brokers operating in the country. Binary options are classified as exotic options in the country and were
in the past regulated by IIROC (Investment Industry Regulatory Organization of Canada) and CSA (Canada Securities Administration Agency). One reason why Canada is not very popular with brokerages can
be chalked up to the fact that the country consists of 10 provinces and three territories each with its own legislation. This makes it difficult for a broker to serve the entire country. For this
reason, Canadian traders mostly have to rely on the services of regulated offshore brokers or reputable unregulated brokers.
Canadian traders can contact IIROC and CSA for any complaints regarding their brokers.
Binary options in Australia are considered a financial product and are regulated by ASIC (Australian Securities and Investment Commission). Any broker that deals in binary options in the country must
be licensed by AFS(Australian Finance Service), a subsidiary of ASIC.
Australian traders are allowed to trade with European brokers that are regulated by CySEC. It's however, better for Australian traders to use Australian brokers since that way they are covered by Australian authorities. ASIC is quite strict in enforcing broker regulations--for instance, the commission requires registered brokers to provide insurance for traders. Only one broker-- HighLow-- is currently registered with ASIC.
ASIC regularly releases information about registered and unregistered brokers who are involved in binary options fraud and scams.
The binary options industry in New Zealand is well developed and properly regulated. The country's Financial Markets Authority is a financial services regulator that also regulates binary options. All
brokers are required to register with the Financial Service Provider Register before doing business in New Zealand. In order to obtain a license, a broker is required to have a physical office in the
country, as well as follow certain rules including the requirement that client and company funds must be maintained in separate accounts. The broker must also be a member of an external dispute
resolution scheme as a means to protect traders. Unfortunately, traders in New Zealand are not allowed to trade with FMA-regulated brokers.
New Zealand continuously blacklists brokers who don't have a license or those who are found guilty of malpractice. Traders can easily check whether their New Zealand broker is registered by typing the unique code assigned to each company in the Financial Service Provider Register.
Italian authorities view binary options as gambling, and consequently have very strict laws for the industry with fines that can reach €500,000 for offenders. CONSOB (Commissione Nazionale per le
Società e la Borsa) is the financial regulatory body in Italy, regulates binary options trading in Italy. Italian traders are required to only do business with either brokers who are directly licensed
by CONSOB or those with EU licenses that have been validated by CONSOB. This means that traders whose brokers are regulated by EU regulators such as CySEC and AMF must also check and see that the
broker has been approved by CONSOB. As noted, Italy tends to be very strict about binary options, and routinely blocks websites of brokers who try to do business with Italian traders without first
receiving approval from CONSOB.
Aggrieved Italian traders can report to CONSOB by filling out a complainant form available on its website.
French authorities consider binary options as a form of financial services. There are two regulatory bodies that oversee binary options trading in the country:
Despite having the two regulating bodies, binary options in the country are not completely regulated. Brokers can choose to register in France or use other EU-regulator licenses. French traders can
therefore trade with any brokers with EU licenses.
That said, it's worth noting that AMF is quite hostile to brokers who use false advertising to lure traders. French authorities have established AARP (Advertising Ethics of the Authority of Professional Publicity Regulation), an interprofessional body that enforces ethical advertising in the financial world. AMF routinely blacklists dozens of brokers who fail to meet these requirements. In fact, France recently banned any advertising of binary trading services.
Traders can report any unethical business practices by brokers by filling the form on the AMF website.
Binary options trading in Spain is regulated by the National Securities Market Commission (CNMV). The organization was established in 1988 as part of the reforms done on the country's financial sector
to make it compatible with EU legislation.
Just as is the case in many European countries, binary options in the country are not regulated by any law. CNMV does not directly license brokers in the country but rather oversees their activities. Many brokers who operate in Spain are licensed by CySEC.
Traders in Spain can use the online form on the CNMV website to report any scams by brokers. The complaint form is meant for Spanish citizens only.
Binary options are very popular in the Mediterranean island of Malta. The Malta Financial Services Authority (MFSA) is charged with the responsibility of regulating binary options in the country.
Binary options in Malta is completely legal and well regulated--brokers can therefore easily apply to the MFSA for a license.
MFSA provides three categories of licenses to brokers:
Annual license fees for Malta brokers range from 3,000-10,000 Euros. Brokers are required to have a physical office in Malta and two senior managers.
MFSA has an online form where traders can report any unethical practices by brokers.
Vanuatu, formerly New Hebrides Island, is a small Pacific island off the North East coast of Australia. Binary options trading is popular on the island and regulated by the Vanuatu Financial Services
Commission (VFSC). Binary options trading in Vanuatu provides many benefits to traders including low tax rates. Further, VFSC provides fast registration and low fees for brokers. Brokers can register
with as little as $2,000 in capital. The broker is not required to have a physical office or local staff on the island.
The downside is that VFSC seems more business-oriented than truly dedicated to protecting traders' interests. Although there is a contact form on the VFSC website, the organization does not provide trader support.
Unlike the case in the recent past, binary options in Japan are well regulated after the Financial Futures Association of Japan (FFAJ) in 2013 created an extensive set of rules for regulated brokers.
Just like in other countries, there are both regulated and unregulated binary options brokers in Japan.
Binary trading in Japan is quite different from the rest of the world. For instance, the lowest expiration time allowed is two hours. This effectively means that you cannot find fast options, which tend to be riskier but more profitable for the trader. Japanese brokers are required by law to provide complete transparency in determining the final price. The FFAJ also discourages bonuses to minimize chances of the trader making wrong judgment. Instead, it encourages affiliate advertisements so long as they don't contain cash-back promises. FFAJ requires the broker to carefully manage all advertising material to avoid misleading traders. The organization can fine both regulated and unregulated brokers who cross the line.
Traders can notify the FFAJ of any broker malpractices via contacts listed on the Japanese version of the website.
Binary options are highly popular in Belize. International Financial Services Commission (IFSC) is the body that regulates binary options in the country. The Belize government passed the Offshore
Banking Act and the Money Laundering Prevention Act in 1996 in a bid to create a reputable and safe business environment.
Brokers who want to register in Belize must be registered as a company in the country through they are not required to have a physical office. Brokers are not allowed to offer their services to Belize residents. Brokers registered in the country are required to follow stringent rules set by IFSC. Traders can contact IFSC using the online form provided. Traders can check the registration status of their brokers on the IFSC website. Bear in mind that the name of broker and the company behind it are not always identical.
Binary options in Israel is regulated by the Israel Securities Authority(ISA), a government organization that was founded in 1968.
Unfortunately, trading binary options in Israel is very difficult for Israeli residents. This has something to do with the reclassification of the Tel Aviv Stock Exchange (TASE) to developed market status in 2010. Subsequently, the Israeli government increased capital gains tax to 25% making stock investments unpopular. Many investors shifted their focus to binary options, and this was partly responsible for the huge drop in trade volume in the local bourse. Understandably, the ISA started taking a dim view of binary options and sees it more as gambling rather than a genuine financial investment. Brokers are required to update the status of their clients regularly via monthly, quarterly, and annual reports.
Many brokers in Israel offer their services to offshore traders. But due to the increasingly hostile stance by ISA, few brokers want to be registered in the country. Traders can report unethical practices by brokers by using the contacts provided on the ISA website.
Binary trading is very popular in Russia and the country is home to many brokers. The Russian Central Bank (CBR) supervises all financial products in the country including binary options. The Center
for Regulation in OTC Financial Instruments and Technology (CRFIN) also regulates binary options in the country.
Brokers are required to deposit 2 million Russian Rubles and a minimum capital of 100 million Rubles before registering in the country. The employees of the brokerage are also required to have a clean history with no records of criminal offense in the past. Traders can contact CRFIN using the online form available on the website.
Binary options trading is very popular in South Africa. The Financial Services Board (FSB) regulates binary options in the country. Brokers in South Africa are, however, not allowed to provide their
services to South African citizens.
FSB provides support for traders who are scammed by unscrupulous brokers. Traders can visit the Consumer Education department on the website for detailed information about binary trading in the country, or use any of the numerous contacts available to forward any complaints.
BVI is a popular binary options center due to the rather loose laws and regulations that govern the activity in the country. The Financial Services Commission (FSC) regulates both binary and forex
brokers in the country. Some brokers in the country are regulated by foreign regulatory bodies such as CySEC.
Aggrieved traders can contact FSC about any irregularities via the simple online form available on its website.