FCA now regulates binary options

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FCA now regulates binary options

“Binary options allow a consumer to make a bet on the expected value or price of a stock, commodity, currency, index, or just about anything that is capable of being measured in financial terms,” – explains the Financial Conduct Authority. Up until 2020, these products were regulated by the UK Gambling Commission, if the company offering them also offered other forms of gambling. From January 3rd, 2020, all responsibility regarding the binary options will shift to the Financial Conduct Authority.

The main reason cited for the decision is the risk that is associated with binary options. These tools can lead to extremely heavy losses for the customers and can be used to defraud individuals as well. “A key risk of the product is the fact that they are typically priced in a similar manner to fixed odds bets since their value is determined by the probability of an event happening. Investors are offered higher returns for lower probability events and lower returns for higher probability events. For investors to make a profit from trading they need to ‘beat the odds’ on a regular basis, which a majority of investors do not,” – explained a statement from the FCA.

From now on, companies offering binary options will have to be authorized by the FCA

As reported by Nyecasino.casino, starting this year, the Financial Conduct Authority became the supervisor of the firms that offer binary options. Furthermore, these products will be treated by the regulators as investment products, following the established practice in the European Union countries. Customers who want to make complaints regarding certain providers will have to contact the Financial Ombudsman Service.

The move is triggered by the proliferation of scams associated with the binary options

In the first half of 2020 alone, reportedly about 700 people became the targets of binary options scams and lost over 18 million pounds in total. The initial response from the authorities was to raid 20 London offices. In a broader perspective, the control over the companies offering the binary options was moved from the UK Gambling Commission to the Financial Conduct Authority.

“UK consumers are being increasingly targeted by binary options investment 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. Fraudulent binary option traders often advertise on social media – the advertisements link to websites that are well-designed and professional looking,” – warns the FCA.

Binary options

Find out how binary options work and what our concerns are.

Update: From 2 April 2020 the sale, marketing and distribution of binary options by firms to retail consumers are banned in the UK.

If you’re approached by a firm claiming to offer binary options products, it’s probably a scam.

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What are binary options?

Binary options are a form of fixed-odds betting. Typically, a trade involves predicting whether an event will happen or not (for example, will the price of a particular share or asset go up) and the outcome is either yes or no.

If the investor is correct, they ‘win’ and should see a return on their investment; if they’re wrong, they lose their full investment.

Concerns about binary option trading

Binary option consumers typically lose money, and these losses can be significant.

A key risk of the product is the fact that they are typically priced in a similar manner to fixed odds bets, since their value is determined by the probability of an event happening. Investors are offered higher returns for lower probability events and lower returns for higher probability events. For investors to make a profit from trading they need to ‘beat the odds’ on a regular basis, which a majority of investors do not.

This feature, along with the short duration of trades, can cause addictive behaviour typically associated with gambling.

Are binary options banned in the UK?

Yes, from 2 April 2020, we permanently banned firms from selling binary options in the UK.

This follows the European Securities and Markets Authority’s (ESMA) temporary ban on the sale of binary options to retail consumers across the EU, including the UK, since 2 July 2020. Our ban includes certain binary options that were excluded from ESMA’s ban.

Prior to 3 January 2020, binary options were regulated by the UK’s Gambling Commission. If you want to make a complaint against a binary option firm relating to a bet made before 3 January 2020, you should register your complaint with the dispute resolution body of the firm. For more information, visit the Gambling Commission’s website.

Binary option scams

UK consumers have been targeted by binary options investment 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.

Fraudulent binary option traders often advertise on social media – the advertisements link to websites that are well-designed and professional looking.

You should only deal with financial services firms that are authorised by us. As the sale of binary options is now banned, any firm offering binary options services is probably unauthorised or a scam.

You can check if a firm is authorised by the FCA by checking the FCA Register of financial services firms. For more information on these types of scams, see our ScamSmart pages.

UK’s Financial Conduct Authority recognises binary options as investment products

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The regulation of binary options in the United Kingdom has come under the full supervision of the Financial Conduct Authority (FCA) which is the financial regulation body in the UK. Binary options were previously regulated by the UK’s Gambling Commission and the Isle of Man’s Gambling Supervision Commission.

An official announcement by the FCA states that binary options in the United Kingdom are to be regulated in the same way as investment products starting from January 2020.

How this affects UK clients

Binary.com’s UK clients who wish to trade binary options on Forex, stocks, commodities, and indices are required to open a new account with Binary Investments (Europe) Ltd that’s regulated by the Malta Financial Services Authority (MFSA). This will give you access to the Investor Compensation Scheme managed by the MFSA.

Under EU financial services law, as Binary.com is legally established and authorised in one European Economic Area (EEA) country, i.e. Malta, it can operate legally in the UK.

Your existing account with Binary (IOM) Ltd will remain in use exclusively for the trading of Volatility Indices – synthetic products that will continue to be regulated by the UK’s Gambling Commission and the Isle of Man’s Gambling Supervision Commission.

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