Over the last few years, binary options have become a popular choice of investment for many retail traders in the financial markets. Hence, it is not surprising to see many online binary options brokers springing up to cater for this fast growing market. Like all expanding markets, the binary options market is not without its challenges. One of the main hurdles that impede the growth of this market is the lack of regulation governing the operations of brokers for binary options. This is because binary options are traded in the Over-the-counter (OTC) market. This mean there has been no centralized exchange for the trading of binary options. Instead, binary options are bought and sold globally through the internet with specialized binary options brokers like Opteck. Cysec the Cyprus regulator made an announcement that from the 3 rd May 2012 all Binary Brokers would need to be regulated by Mifid, the same regulator as the online Forex industry, so that should make things easier for the trader.
Regulations governing Opteck’s Operations
As mentioned, the binary option market has been essentially unregulated although this is now changing and a requirement for regulation has been recently initiated. It means brokers need to start applying and certainly thinking about getting regulated. It takes a long time to get regulation with many steps to accomplish, a lot of paperwork and a lot of money to put into it.
Historically the lack of regulation has given cause for concern as to whether a binary option broker is reliable or not. Many established binary brokers rely on their hard earned reputation to establish their credibility and reliability in this highly competitive market. For newly established binary brokers like Opteck, this can be quite a challenge as they have to win over sceptics from the market.
One way for newly established binary options brokers to win over sceptics is by subjecting themselves to regulations voluntarily. However, in order to be regulated, there must be an existing regulatory framework that governed the binary options market. Because, the binary options market is sort of a ‘no man lands’, little or no regulation exist. For UK companies like BNET ONLINE LTD which owns the Opteck trading platform, their operations are not governed by the Financial Services Authority (FSA) per se. It is currently unclear as to whether binary options falls within the legal definition of ‘options’ under the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001. Providers of binary options ‘betting’ are instead more likely to be regulated by the UK Gambling Commission. As such, we do not find Opteck claiming that it is FSA regulated in order to gain credibility.
Nevertheless, the current trend seems to indicate a strong push towards regulating this expanding market. Cyprus being a popular operation base for many brokers due to the low tax rates and favourable investment environment is planning to regulate the trading of binary options by the Cyprus Securities and Exchange Commission (CySEC). CySEC recently announced the classification of binary options as a financial instrument which falls under the Investment Services and Activities and Regulated Markets Law of 2007/09. By doing so, CySEC is laying the ground work for regulating the binary options brokers in Cyrus in the future. It follows that with CySEC taking the lead; it is likely that the FSA will also embark on a similar undertaking to regulate binary option trading in the UK.
Operational History Of Opteck
Just recently established in 2011, Opteck lack any operational history for one to draw any conclusion about its reliability. Nevertheless, Opteck also lack any bad feedback that is typical of an unreliable operation. From this perspective, Opteck is worth looking into as a binary option broker for novices trying to profit from the lucrative binary option market.