Binary Options broker Banc de Binary has been charged by the U.S Commodity Futures Trading Commission (CFTC) of operating illegally within the U.S market. Since the announcement was first made by forex news sites some 15 hours ago the Internet has been awash with articles discussing this big development in the binary options market.
It comes as the latest in a number of moves by regulatory authorities to stamp out unregulated firms offering financial investment vehicles. Most recently there were announcements made by Italy’s CONSOB of certain binary brokers having their IP addresses blocked within the country, Japan has also made similar moves in order to ensure that unlicensed companies are not taking advantage of the recent boom in online trading, and the even more recent boom in the growth of binary options, which is a simplified method of online trading that allows investors to speculate purely on the directionality of an underlying asset rather than the magnitude of its changing price action.
Banc de Binary is being sued by the U.S government specifically for “Violating the CFTC’s Off-Exchange Options Trading Ban and Operating as an Unregistered Futures Commission Merchant”. The U.S market has been a major issue in the industry for a while now, the growth of the industry over the past year or so has been primarily dependant on the European market, which has moved to reclassifying binary options as legitimate financial instruments rather than another form of online gambling. This has been primarily thanks to CySEC (the Cyprus Securities and Exchange Commission) which took the first move in regulating binary options and granted Banc de Binary with the first regulatory license in the industry. Malta is said to follow suit imminently with its newly founded Maltese Financial Services Authority being responsible for the regulation of binary options in the country, and the granting of trading licenses that will allow brokerages to extend their services throughout Europe according to MiFID protocols.
The law suit is directly a result of Banc de Binary offering its services to U.S customers without being licensed, which many other brokers have also been guilty of, and are indeed still doing. This is likely to be the first in a series of such action suits aimed at closing down binary trading activities within the U.S as was done in the online gambling market several years back.
In a statement made to the press by David Meister, the CFTC’s director of enforcement, he had the following to say: “If a company wants to offer U.S. persons the opportunity to buy and sell predictions on the direction of commodity prices, the company must play by the rules or suffer the consequences. The applicable rules are on the books for good reason – to protect market participants and promote market integrity – and we will serve the public by enforcing them.”
Sometimes you just have to take a stand. An issue comes up that challenges your thinking. Writing this article gives binary options wire the opportunity to take a stand.
It’s very interesting that the CFTC should choose to come after Banc de Binary at this time. The company withdrew from the U.S market at the beginning of 2013 and enforced a policy that saw them only pursuing markets in which they were officially licensed. This has actually hurt their business; They are moving to protect their own interests and to monopolise an industry that generates an enormous amount of revenue. If you want the bottom line behind this law suit all you will need to do is check for the inevitable rise in the volume of Nadex binary trades that will take place as a direct result of this.
Nadex remains the only officially regulated binary exchange within the U.S, and a tug of war between the products it offers and the European binary options offered by the rest of the industry is sure to ensue.
But what does this news mean for traders? If we were to hazard a guess it would be very little. U.S customers have long been prohibited from trading with Banc de Binary, and are still trading with many of the other big names in the industry. The industry continues to grow as evidenced by the ubiquitous presence of binary brokers at the most recent iFXEXPO that only just wrapped up.
The thing to keep in mind here is that when national bodies move against binary brokers it is not an aggressive move against the industry as a whole. Money talks and it enunciates its vowels loudly and proudly. They are simply trying to prevent outside companies benefiting from the boom and removing the funds from their own country. Most of the countries that have exhibited hostility towards binary options brokers have thereafter announced that their own regulatory structures are to be taking on the licensing of binary options. This is obviously to attract brokers to their own shores, a license necessitating establishing local offices, employing residents and conducting banking within the country in question.
The wild west days of the binary options industry may be over, but this next face will be fascinating to watch as we see who stands the fire of regulation and who falls by the wayside. As always we will be here to bring you the news.
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