Is Binary Option Trading Legal and Regulated?

Is Binary Option Trading Legal and Regulated?

CySecEven though Binary Options Trading goes on worldwide 24/7,  there are regulations involved in various countries. Binary Option Trading has raised issues about its legality and/or registration process in Europe, but especially in the United States. Lately, there is much discussion of the legality of the trading process, particularly for those U.S. clients who are interested in trading in Binary Options.

While there is no law currently in the United States that states the process of Binary Option trading may be illegal, traders from the US may experience problems when registering with a Binary Option broker based in Europe or the United Kingdom.

The challenge comes from the variety of assets offered by Binary Option brokers. These investments opportunities do not fit under one single regulatory agency in the U.S. The European Union (EU) has only one regulatory agency for financial investments and its brokers; and it recently offered regulation to include the Binary Options Industry.

Since 2013, the country of Cyprus has aggressively sought the business of many Binary Options brokers and encouraged them to submit their application to CySec (Cyprus’ Financial Regulator) for regulatory approval. Many Binary Options brokers are headquartered in Cyprus due to its favorable corporate tax laws which allow companies to keep more of their profits without having to pay higher company taxes. There is, of course, the requirement set by CySec and the EU that includes a lengthy application process, a fee, and a review in order to be granted a broker’s license.

Offshore Jurisdiction Registration

The process of getting the Binary Options business licensed and authorized from the CFTC (Commodity Futures Trading Company) is very difficult, therefore most Binary Options companies are registering under the jurisdiction of some other country.

*It should be noted that it is possible for any company to start up a trading platform; however, reputable Binary Options trading platforms are those that are registered with governments which recognize the Binary Options process as a legitimate investment instrument.

License Is Granted Based On a Contractual Agreement

Trustworthy Binary Options brokers (Comparison Table) operate with valid licenses. The licensees are granted based on a contractual agreement that the broker will be compliant with specific rules and industrial regulations. The rules consist of clauses that define the importance of processing payment withdrawals in a timely manner, when requested. The rules entitle the brokers to be transparent about the integrity of the price quotes for the underlying assets being traded.  If the trading platforms are going to work against these rules and if anyone falls victim of business misconduct or fraud, then they may make a formal complaint against the company. It will then likely lead to legal prosecution according to the laws of the jurisdiction, which the trading platform is to abide by.

International Financial Oversight Commissions

Several jurisdictions in different nations regulate the licenses offered for trading platforms in accordance to their respective financial oversight commissions. The financial control bodies in different nations are CFTC in the USA, MFSA in Malta, IFSC in Belize, FSB in South Africa, JFSA in Japan, CySEC in Cyprus, and FCA in the United Kingdom.  It’s best to trade on Binary Options platforms that are licensed or regulated by one of these bodies. Any  trading platforms which obtain licenses from these bodies are obliged to operate within the jurisdiction of these commissions.

Brokers who are unable to obtain licenses from these jurisdictions may not be in a position to allow traders from other countries, such as the U.S. or Italy, trade on their platform. So if a trading platform or corporation excludes clients from a specific country, it just means that  company is trying to be in compliance with regulations. Therefore, the legality of Binary Options trading is dependent upon the regulatory trade laws that govern the nationalities and related jurisdictions of the company and the client.

The great news is that if you, the day trader, have an IP address from an area within the jurisdiction of a trading platform’s authority, then you should be able to register with the company, open an account, and start trading immediately.

Read More to learn about Trading Bitcoin on a Binary Option Platform



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