Binary options trading entered the global stage around the same time as online forex trading. Specifically, the emergence of firms offering binary options began in the mid 2000’s, reaching a peak roughly 10 years later. Although forex trading always had a stronger following, binary options was the closet thing to a competing service. In essence, binary options rode the coattails of the initial success of online forex trading but was never a serious enough product for long term sustainability.

During the boom period of the FX industry in the mid 2000’s, one could see binary options firms popping up at the same pace and sometimes even faster than online forex brokerages. In fact, many FX brokers diversified into binary options in order to capture a different market segment.

Starting in the mid 2010’s a combination of regulation and investor education marked the peak of binary options trading. It is our belief that the binary options industry is now defunct. We would strongly encourage readers and our clients to avoid launching a binary options business for reasons we’ll outline in today’s column.

#1 Why Did Binary Options Trading Die? – Regulatory Changes Are The Biggest Cause

Binary options trading is now illegal in almost all parts of the globe. Starting the mid 2010’s, regulatory changes in the United States kicked off the process which then spread to Europe and other parts of the world. Nowadays, almost every offshore jurisdiction prohibits binary options trading.

While a handful of financial service regulators still allow for binary options trading, global regulations have rendered it illegal to offer binary options in nearly all parts of the world. If you are looking to start a binary options broker, it’s important to ask how it will be possible to grow and develop a business that has been blacklisted by most of the world?

#2 Binary Options Trading Is No Longer Popular Due to a Lack of Liquidity

Liquidity, which can be understood as the pricing and execution of orders, is an essential aspect of forex trading. Because binary options trading is banned in nearly all parts of the globe, it is nearly impossible to find a liquidity provider, or pricing provider that will be willing to partner with a binary options firm. 

Without the ability to obtain pricing or manage risk, attempting to start a binary options broker is now an uphill battle.

#3 Binary Options Brokers Face Banking & Payment Challenges

If the first two reasons weren’t compelling enough, consider the fact that no bank or payment service provider (PSP) will be willing to partner with an unregulated binary options broker. Unregulated forex brokers face tremendous hurdles when trying to secure a bank account, what chance then does a binary options broker have? From our perspective, it is just about impossible for a binary options broker to obtain either a bank account or PSP.

#4 Market Credibility

As a last thought, consider the overall reputation of binary options trading. The combination of regulatory actions and increased investor education, have resulted in binary options being associated with fraud and scams. Trying to convince investors to trade binary options will pose a massive challenge when just a little research points to the risks of this type of investment product. For this reason, we strongly encourage our clients to consider launching a forex brokerage instead of binary options.

Forex Consulting – Guidance & Consultation in Launching a Forex Broker from Scratch

For the reasons outlined above, we’d strongly discourage anyone from trying to start a new Binary Options broker. Not only is it illegal to take clients from most parts of the world, the industry itself is on a steep decline, making it difficult to find clients and grow the business. From our standpoint, the binary options industry is dead. Furthermore, even if you did try to launch an unregulated broker, there will be no banking services available as banks and payment institutions no longer cooperate with binary options brokerages.

We can offer 2 alternatives. The first is to consider offering traditional options trading, which mirrors the stock and futures market. The other idea is to start a foreign exchange broker, offering options as a supplementary service.

To learn more about our offering, contact us today!