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UK Regulation of Binary Options: An Update

But apart from any measures that individual countries or regions are undertaking to assure their traders are safe, the traders themselves have to educate themselves and stay informed about all the nuances when it comes to legal matter. Skrill is a UK based payment processor and usually has strict merchant account regulations in place. So, all legal European binary options brokers are implicitly also legal UK binary options brokers. What are binary options? Trading binary options in the UK has become increasingly popular over the last five years or so.

The UK regulation of binary options has been long-awaited since the DCMS took the responsibility away from the UK's Gambling Commission.

Concerns about binary option trading

Traders are naturally also allowed to trade at both kinds of brokers. At this moment the binary options laws of the United Kingdom are more or less the same to those of other European countries. This is because European Union regulations require member states to implement laws that can be applied in all member states. So, if a financial service provider that is licensed in the UK wants to offer its services in Germany, it can freely do so because that broker operates under European Union laws, which are compatible with German laws as well.

This is also the case for brokers licensed in other European countries than the United Kingdom. For example, if a broker is licensed in Cyprus then that broker is legally allowed to operate in the United Kingdom as well, because the online trading laws and regulations of Cyprus are more of less the same as the ones of the UK.

So, all legal European binary options brokers are implicitly also legal UK binary options brokers. If you live in the United Kingdom, then trading at an Italian broker is from a legal and safety perspective exactly the same as trading at a UK licensed binary options broker.

However, you should not trade at brokers that are not licensed in any place. It is not illegal to trade at such brokers; this is not the issue. The issue is that brokers that are not licensed at all are not safe and should not be trusted. There are at this moment multiple government agencies in the United Kingdom that regulate financial betting. These agencies closely watch the online trading market and the activity of the brokers that are licensed in the UK or whose other European licenses were approved in the UK.

In the past, the FSA was responsible for both the creation of new regulations and the enforcement of these regulations. The Financial Conduct Authority FCA is tasked with the development of new regulations and rules that will have to be followed by United Kingdom binary options brokers. What the government basically did was to divide the tasks of the former FSA into two. The government felt that if the creation of new regulations and the enforcement of these regulations will be done by two separate agencies, then the UK financial service market could be regulated much better.

As explained above, there are really two types of binary trading brokers legal in the United Kingdom. The first types are those that actually have a license issued by UK authorities. The second are those that have licenses issued by a different European country, which are valid in the United Kingdom too. Just as a conventional call spread made up of two conventional call options is still considered conventional options trading, binary options strategies made up of a combination of binary options are still binary options trading.

Will the FCA now permit the margined trading of binary options? Logic would suggest that since the UKGC used to be considered the correct regulatory environment owing to the fixed odds nature, i. Will a binary option be a binary option if it is offered in the percentage return format that has become so prevalent and popular? The mathematical formula of a binary option price is constrained by the lower and upper limits of 0 and 1 respectively.

Will this pricing format be rigidly adhered to or will a factor of be permitted, i. Alternatively bookmakers offer the odds in the sport fixed odds style, e. Who is to say that one cannot trade financial markets, e. Every UK binary options broker existing or intending must be able to show evidence of financial capability to provide full clearing and settlement for the trading activity of their clients from their own funds, without touching the segregated funds.

Such an operation would require massive liquidity of billions of dollars, effectively ensuring that only viable and financial capable corporate entities backed up by major banks can enter into the business of becoming UK binary options brokers.

This effectively stops the problem of traders making profits and not getting paid as has been the case with some brokers in Europe. Every regulated UK binary options broker is required by law to submit monthly reports of their finances as well as the status of segregated accounts. If a broker is not listed in this register, such a broker cannot be a UK binary options broker, even if that brokerage firm claims it has such authorization.

The results returned for the company show that the company is authorized by the FCA to conduct financial services business in the UK, making it an authentic UK binary options broker. This feature of being able to search on the status of a firm should give all binary options traders in the UK jurisdiction great confidence in the integrity of the system.

This scheme affords clients of authorized financial services firms, possible financial compensation of between 50, and 85, GBP if such firms are unable, or likely to be unable, to pay claims that have been made against them.

This is usually because it has stopped trading or has been declared in default. This underscores the importance of checking the regulatory status of any broker that claims to be a UK binary options broker. The FCA has strict rules regarding customer verification by its authorized brokers. These rules are set down below.

How To Choose Good UK Binary Options Broker?

Learn everything about the binary options rules and regulations in the United Kingdom in order to be able to trade at legal brokers with a license. The top offers and best binary options brokers in UK. Suitable for any trader, all regulated. Binary options trading has become increasingly popular around the world. But what about regulations of this industry in different countries? Binary Options Regulations. No Comments. What is Binary? Previously, binary options trading in the UK was handled by the gambling commission. But since it is regulated by FCA (Financial.