Binary options trading came about around the same time that online forex trading began to reach critical levels of adoption. Although forex trading was always a larger market, binary options ran a close 2nd, in many cases riding the coattails of the success that FX trading paved the way for.
As a result of this success, it became popular for consulting firms to offer investors the ability to start their own binary options brokerages, a service that still exists, although on a smaller scale today. We believe that it no longer makes sense to launch a binary options brokerage, for reasons we’ll cover in today’s post.
#1 Regulatory Changes
Binary options trading is illegal across nearly all parts of the globe. This is one of the biggest factors against starting your own binary options brokerage. A major question that you should be asking is, how do you expect to grow a business that is illegal in almost all parts of the world?
#2 Lack of Liquidity
Because binary options trading is banned in nearly all parts of the globe, it will be difficult to find a liquidity provider, or pricing provider that will partner with your business. Without this essential component, it will be difficult to even get started, let alone handle risk.
#3 Banking & Payment Challenges
If the first 2 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. It is already difficult enough for unlicensed forex brokerages to secure banking options. Attempting to find the same payment services for a binary options broker will just about be an impossible task.
#4 Market Credibility
A final thought to consider is the overall reputation of binary options. Due to regulatory action and overall market education, the trading of binary options now has a serious, negative reputation. Trying to convince investors to trade binary options will be an uphill battle when just a little research points to the risks of this type of investment product.
Forex Consulting Services – Let Us Guide You Along The Way
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!