One key issue that traders need to take into account when trading is related to regulation. The same applies to binary options as well and you need to make sure that your broker complies with the regulatory framework that is in play. In this article, we will discuss the regulation for binary options and more specifically, some new implementations that started from the beginning of 2018.
FCA to supervise the Binary Options industry
Until the end of 2017, binary options had been licensed by the Gambling Commission. Starting from January 3rd, 2018, the Financial Conduct Authority will supervise the industry and all brokers that have activity in the United Kingdom will need to take into account the legislation that is in place.
Widely regarded as one of the toughest, and probably the toughest financial regulator in the world, the FCA did not have a friendly approach to binary options.
The agency warned against binary options scam and stated the following:
“UK consumers may also be targeted by binary options scams, which commonly promise higher than average returns for bets that never occur and manipulate software to distort prices and payouts. They also commonly refuse to return client funds and break all contact with customers.”
According to the FCA, binary options trading can have a handful of negative consequences:
- Addicting behavior- stress and the fear of trading can harm your biology.
- High potential for fraud – since 2012, the FCA received 2605 complaints from people who lost money with scamming binary options brokers.
- Conflict of interest.
From 2018, binary options traders can make complaints to the Financial Ombudsman Service and also they will have access to the Financial Services Compensation Scheme.
However, all the losses resulted from trading binary options will not be covered. Although the FCA had a tough speech related to binary options, it is good to know that a serious regulator is supervising an industry where the level of fraud had been high.
We expect scamming companies to not be able to continue their activity and traders to be able to trade binary options with reliable and trustful binary options brokers.