In the most intriguing piece of new the binary options industry has had to contend with in a while, the Judge of Rome has obliged Italian Internet service providers to block the URLs belonging to a number of binary options brokerages. The initial request originated from Consob, Italy’s financial regulatory body and was pushed through by Rome’s Public Prosecutor, following complaints against a number of binary options brokers that the regulatory body has been receiving from Italian customers. This is a highly important development in the industry; whcih has been pushing to legitimise itself as offering financial products rather than gambling services. So far eztrader, anyoption, ioption, startoptions, bocapital and tradesmarter have been blocked from appearing on Italian computers.
The debate has centred around the fact that the Italian Consob finds that binary options are more closely related to online gambling, rather than legitimate investment vehicles and that the companies offering these binary options services are presently not in compliance with Italian financial legislation sas to how they are being marketed to the Italian public. In additions to the Consob’s issues with binary options, their definition as a regulated financial instrument under the pan-European MiFID rulings call for these products to be regulated by and EU body, which most of the firms offering binary options have yet to do. To date the only officially regulated broker of binary options is Banc De Binary, which is licensed by the Cyprus Securities and Exchange Commission. However a number of licences are expected to be granted by the equivalent regulatory body of Malta.
Fulvio Sarzana, lawyer and partner at the Italian Sarzana and Partners firm, has been working on behalf of the Italian ISPs in order to ban binary options websites from operating in Italy. He has publically commented on the matter, saying that he belives binary options to be gambling rather than legitimate investment vehicles. These companies first came to his attention in 2012 after a number of Italian Watchdogs filed complaints. These complaints in-turn led to the Consob issuing warnings to a number of online binary options brokers which went largely unheeded. Sarzana seems to believe that this is only the beginning in a tide that is increasingly turning against binary options and he believes that many more binary options brokerages are soon to be affected by the ruling.
This, of course is not the first time we have come across governments moving against binary options brokerages, but due to Italy’s influential position in Europe it is perhaps the most important challenge to binary options thus far. In 2012 the Japanese Financial Services Authority sent cease and desist orders to a number of binary options brokers while the body worked to devise a regulatory response to the new financial instrument that was sweeping through its country. Similarly Turkey’s Capital Markets Board published a document in June of last year levelling a series of accusations at binary options brokerages, claiming that they were involved in criminal activities. The result was having Turkish ISPs block a number of binary options providers’ websites from being available to Turkish citizens.
We believe this is a result of a much broader systemic issue affecting the binary options industry and regard it as a matter of time before other authorities move against binary brokers if the industry does not take stock and begin to pursue a more sustainable model of conducting business. Other EU nations to have issued warnings to binary brokers include Spain and France, although there does appear to be some confusion on this issue as according to the official EU line binary options fall under the definition of legitimate financial instruments as defined by MiFID. One thing is certain, we are entering a new phase in the evolution of binary options and it could go either of two ways. Binary options either go the way of online gambling, or greater efforts are made within the industry to legitimise the services these brokers provide and they begin to fall in line with a broader framework which governs their standards and practices. Invested as we are in seeing binary options thrive as an industry, we have been putting together a list of directives that we believe binary options brokerages should follow if they wish they operate unhindered in all the markets they have been making in-roads into. Watch this space for more…