Why Is Binary Options Trading Illegal and No Longer Available to Investors and Traders?

Once an emerging speculative product that saw rapid growth in the mid 2000s, the binary options industry has seen rapid decline in the past several years, mostly due to changing regulations.

Binary Options were once a very popular investment product that was often added as a complementary service to a forex broker’s website. Although many binary options brokers existed independent of forex brokerages, there was a close relationship between the 2 as both products centered on the forex market.

A Brief History of the Binary Options Industry

Similar to the growth of the forex market, binary options grew in popularity as online trading of all kinds took the Internet by storm in the early 2000s. During this period, forex was loosely regulated making it quite easy to set up a binary options firm. By 2010 there were hundreds of binary options brokers spread across the globe. The industry had grown to such an extent that one could find binary options brokers taking booths at major FX expos.

In the last couple of years, the party soon came to an end for the binary options industry. The single biggest blow came from the The European Securities and Markets Authority, known more commonly as (ESMA). Due to the massive number of complaints and growing negative reputation of binary options brokerages, ESMA decided to outright prohibit the marketing, distribution and sale of binary options services. With Europe being one of the major areas for FX trading, this decision basically decimated the entire industry.

With ESMA setting the industry standard by making it illegal to operate a binary options broker in Europe, regulators in other parts of the world such as Canada and Australia began to follow suit. Given these changes we can confidentaly agree that the binary otpions market is dead.

Is it Safe to Trade Binary Options?

It’s important to emphasize that binary options trading is now illegal in the United States and Europe, with many global regulators following suit. Many investors are now questioning whether binary options trading is safe, which is a very good question. Considering that major global regulators have banned binary options trading, the only binary options brokers available are unregulated and unlicensed.

We would discourage any investors from opening an account with a binary options broker as there is no regulatory protection from an unlicensed brokerage. This makes for unsafe and unfair trading conditions.

Why Were Binary Options Banned in Europe and Other Regions?

The main reason Binary Options were banned in Europe was due to the nature of the product, which was extremely in favor of the broker to a point where investors and traders could not profit from it. Unlike the foreign exchange market, which has proper regulation for both dealing and non dealing firms, binary options were purely a market maker model skewed against the client. 

For this reason, we strongly discourage investors from considering unregulated binary options products as there is no legal recourse or overall safety in working with such firms. Furthermore, the chance of success is minuscule at best as illegal binary options brokerages are specifically trying to take advantage of their client base.

Does It Make Sense to Start a Binary Options Business?

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. 

Forex Consultation & Expertise – Start an Options or Forex Broker Today!

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 either choice, don’t hesitate to contact our team of specialists today!

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