Why You Must Trade with Regulated Binary Options Brokers

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There are regulated as well as unregulated brokers in the binary options market. Trading in the binary options markets is a reality in many countries. However, in countries such as the US, it is compulsory that the traders should always pick a broker that is regulated. In European countries and many other parts of the world, binary options brokers are regulated by the European Union and some other brokers are regulated by the Cyprus Securities and Exchange Commission (CySEC). It is the most popular forex regulator and is looked up to by the binary options trading community to set up a regulatory framework.

In times before online trading became so common as they are today, one could trade binary options only over the counter from the issuer directly to the buyer. These instruments could not be sold between the periods of issuance and expiry. In the United States, the Chicago Board Options Exchange was started in the year 1973 which started regulating binary options trades. The Options Clearing Corporation in the US was started with the growing need for implementing controls and monitoring binary options trades. Traders were then required to maintain a license for the purpose of exchanging or over-the-counter sales of binary options.

Online binary options started around the year 2008 and pioneers of the online trading operations chose to become licensed and regulated players. This was after CBOE and NYSE Amex launched binary options under the name of Fixed Returns Options (FROs).

Why Are Binary Options Popular

regulated binary options brokersTrading binary options is popular amongst the beginners as well as the seasoned traders. Binary options are less complicated and easy to understand. The most important point is that the trader is completely informed of the risk and the reward that is involved in the trades. In the light of this information, it I important to understand that for a binary options trader to succeed, it is important that they work with licensed and regulated binary options brokers to achieve their financial goals using this instrument.

Given below are a few reasons as to why it is a good idea to work with regulated binary options brokers.

#1: A trader purchases binary options directly from the broker that provides the trading platform. It is, therefore, of utmost importance that the trader picks a trustworthy broker to work with. This would mean that the trader has a chance to receive accurate advice, gets a chance to work with fair prices and also assured of reasonable returns in case the trades are successful. Regulated brokers will have more interest in the success of their clients and the traders get the best deal on all aspects of the binary options trades.

#2: Regulated binary options brokers have no choice but maintain the funds of their clients as well as their company’s funds separately. This increases the security of the investors’ funds retained with the brokers.

#3: With regulated brokers, prior to granting their operations license, it is ensured that they are possession of a sufficient amount of financial capital that will enable them to run their operations of providing the trading platform to the traders without any hitch, deliver the appropriate price quotes and offer payouts to the winning trades without any delay whatsoever.

In the real-time scenario, it is true that starting every week, there are close to ten new brokers that start their operations. It is also true that a majority of these brokers function in the unregulated sector. There may be just a handful of regulated brokers functioning in the market. The next challenge is to pick out the best ones from these brokers that you can work with to realize your financial goals. Brokers that are regulated does not necessarily mean that they are good. Choosing the right broker to work involves examination of factors such as the company and its capitalization, the quality and type of trading platform that is offered, type of assets that are offered for trading, security measures, payout methods, etc., among others.

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Lack of regulation may turn away many investors from taking part in binary options trading. Many unregulated brokers are known to indulge in unfair trade practices. These two main factors require that the binary options market must function with regulations. All said and done, it is not an easy task to implement regulations on a global scale.

In the year 2012, CySEC ruled that binary options brokers would comply to the Investment Services and Activities and Regulated Market Law of 2007 – 2009. Implementation of this rule meant that it was compulsory for those binary options brokers functioning in the specified region would have to apply for a license as a Cyprus Investment firm to continue with their operations. Regulated binary options brokers also have to file tax returns as well as submit two-year business plans as part of compliance with the regulations.

Regulations also stipulate that the brokers would have to maintain separate funds of the clients’ capital investments and the company’s money separately. This helped to increase the confidence of the existing clients and helped to bring in many new ones as well.

As a closing thought, investors should not be in a hurry when choosing the binary options broker to work with. They should study the operations of the broker that they have identified patiently and only after they are completely satisfied should they sign the contract. The investor can also make sure that withdrawal of funds is an easy procedure by making a small deposit. In case all these tests turn out positive, the investor can make larger deposits and decide to work with the chosen binary options broker.

It is equally important for the investor to test the customer services department of the broker. The investor should make sure that they get a good response from the customer service personnel to execute their trades successfully. The trading platform can be tested by opening a demo account and working on it prior to making the real-time trades.

In the recent past, many of the binary options brokers have been getting ready to comply with regulatory changes that are on the anvil as well as those that have already been implemented. This ensures that more investors will be trading with regulated binary options brokers in the near future.

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