WHAT HAS CHANGED IN THE INDUSTRY OF BINARY OPTIONS TRADING OVER THE LAST FEW YEARS

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WHAT HAS CHANGED IN THE INDUSTRY OF BINARY OPTIONS TRADING OVER THE LAST FEW YEARS

Internet is fully packed with information about how to trade binary options. You can find everything from slander, false accusations and revelations, sometimes even fake reviews of all those who lost all their money and those who have become a victim of fraud, to different kinds of useful information. However, there are not much places you’ll find a notes about where it came from and what we should expect in the near future? We took the courage to briefly highlight for you these issues!

BINARY OPTIONS – ITS APPEARING

So, directly classic options, has long been in full using in trading. Big investment companies and banks use this instrument as a means of insurance capital, in other words hedge, and also to earn on financial markets. However, binary options are a relatively new instrument which even now still be in the stage of its development and improvement.

2008 is considered the period when binary options saw the world. Actually at that time CBOE exchange (Chicago Board of Option Exchange) has proposed a new format of investment contracts. Currently, this instrument had pretty much occupied financial market. However, we hasten to note that the trading in this kind of exchanges will be greatly different in comparison with online binary options trading.

The key rate of the infrastructure development of the binary options market is the automatization of creating bets and transactions (opening/closing) process. The positive in all this is that the time for this kind of an automated process in the end is formed using a special platform designed for online trading in the internet.

Speaking about the current trends in the industry of trading binary options, should note the following key points:

• the rapid emergence of a large number of trading platforms (binary options brokers), which are competing among themselves in the field of online binary options trading;

• diversity of assets (financial and commodity), relying on the dynamics of price trends according to which the bets are often formed — and as a result, on-line process of investing in binary options;

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• simplification and improvement of the binary options broker of various procedures, with the aim of attracting a trader and providing the most favorable process for him (including user registration, deposit / withdraw funds from the trading account, as well as the definition options of the online transactions) and, in the end, the emergence of trading robots.

Stories about successful binary options trading and the excess profits are still “excite” the Internet every time with new strength. Mythical enrichment in just a few minutes is able to mess minds of inexperienced traders that adds fuel to a burning bright flame of fire, under the name of “binary options”. Hence the emergence of this theme inexorably progresses from day to day, absorbing more and more number of goals.

We offer you to try this interesting instruments in trading and maybe after understand all its charm. Because by its nature it is very interesting method of earning on the prediction of the dynamics of exchange of the invested assets, which are directly traded on the financial markets.

After that, we think, it will be interesting to understand the intricacies of this trade. And therefore, we propose to use the trading platform IQ Option and become along with this the top broker the world of binary options.

“General Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.”

What is the history of binary options?

Binary options trading is option trading for which there are two possible results. A trader purchases an option and at the expiration of the option period.

If the option is profitable, it generates approximately an 80% return on the trader’s investment. If the option is not profitable, the trader loses whatever amount of money he had paid for the option. Binary options are very simple to trade, even for inexperienced investors, and binary options trading requires very little starting capital – usually no more than a few hundred dollars.

Binary options trading for the average retail trader essentially began with the U.S. Securities and Exchange Commission’s approval for exchange trading of these options in 2008. Since then, it has expanded and spread very rapidly.

Binary options had, in fact, existed for many years before 2008, but they were previously available only to large, institutional traders or high net worth individuals through the over-the-counter market.

In 2007, the Options Clearing Commission recommended changes in binary options trading that would make them freely available for retail traders, and in 2008, the SEC approved the offering of binary options as a tradeable investment instrument. Shortly thereafter, the Chicago Board Options Exchange (CBOE) and the American Stock Exchange began offering binary options for public trading.

Early on, binary options trading was still complex and challenging for retail traders. Initially, only call options were available on the CBOE. Two factors led to the explosion of binary options trading: first, the broadening of the types of options available, accompanied by significant improvements in trading platform software that greatly simplified the trading of binary options. Another factor was the introduction of binary options in forex trading, where they gained popularity much more quickly than they had in stock and futures trading.

Today, there is growing flexibility in binary options trading. Traders can specify not only the amount of money they wish to risk on an option, but its strike price and expiration period. It is possible to purchase insurance on a binary options trade by opting for a lower payout percentage, in exchange for which the trader will only lose part – rather than all of his option investment – if the option is not profitable at expiration.

Binary options are available across virtually all tradeable financial assets, with a variety of contract types and expiration periods ranging from one minute to one year. There are hedge funds that primarily focus on binary options trading. In the forex markets, binary options trading was initially only available through specialized brokers. Recently, regular forex brokers have added binary options trading platforms for their clients. Binary options trading will likely continue to increase in popularity in the foreseeable future.

History of the Binary Options industry

Jean-Yves Sireau

Jean-Yves Sireau is founder of Binary.com

More posts by Jean-Yves Sireau.

Jean-Yves Sireau

This article is an attempt to chronicle the history of the binary options industry, as seen from a Binary.com perspective.

Early years: 1999-2020

The Binary.com venture was founded in 1999 as a joint-venture between Jean-Yves Sireau and Regent Pacific Group Ltd., a company listed on the Hong Kong Stock Exchange. The venture was funded with a US$ 2 million capital injection by Regent Pacific.

The website, originally known as BetOnMarkets.com, was launched in early 2000 following registration of the company’s US patents.

During those days, binary options were considered to be a gambling/betting activity in the European Union, hence the company operated under betting licences issued by the Malta and Isle of Man gambling regulators.

Until around 2020, there were very few other companies in the binary options industry. Most companies that started in the field subsequently closed down:

In 2001, Societe Generale (a large French bank) launched Click Options which was operated under financial regulation. The service was closed in 2020.

In 2005, OANDA launched box options, a highly innovative binary options whereby the user gets to draw a “box” on the chart that the underlying instrument must hit or miss. This service was subsequently discontinued.

In the UK, CityOdds launched binary options, only to close a while later.

A few years later, BetsForTraders launched a binary options service from the Isle of Man, but also discontinued (and thereafter transferring clients to BetOnMarkets).

In early 2020, major UK bookmakers such as William Hill launched binary options, as did Ladbrokes. Neither services were a success.

The seismic change: December 2020

The momentous event that changed the industry happened in December 2020 when the European Commission ruled that binary options were not gambling instruments, but were in fact financial instruments that should be regulated under MiFID by the financial regulators of each European country.

The change was likely due to good intentions on the part of the European Commission; they must have expected better investor protection by moving binary options from gambling to financial regulation. What happened instead was almost impossible to predict as binary options –– legitimate financial products in their own right –– became embroiled in one of the largest scams of the modern era.

The Israeli model emerges

This change in regulatory status rapidly led to drastic changes in the industry, driven by Israeli companies who set up operations in Cyprus. However, these companies had a very different business model in their minds compared to what Binary.com had been practising over the past 12 years.

What these Israeli companies had in mind was that with a Cypriot financial licence, they could then set up call centres to cold-call potential clients around the world. Indeed, as long as the industry was regulated as a gambling service, setting up call centres wouldn’t be possible, because cold-calling people and saying, “We are a gambling company; would you be interested to know about our services?” isn’t going to work. Recipients are going to think, “Gambling? Sorry, I’m not interested” and slam the phone down. But if they can say, “We are an EU-licensed financial services company; would you be interested to know about our services?” then recipients of the calls are likely to be much more receptive.

Rapid growth of the crooks

The highly aggressive and often unscrupulous business methods of these Israeli companies led to a very rapid explosion in the binary options industry. Hundreds of white label websites sprung up seemingly overnight, supported by a large army of call centre salespersons, and numerous fake “binary options broker” comparison websites and fake “awards” sites.

The global turnover of this largely crooked binary options call-centre industry is estimated to have grown rapidly, roughly doubling in size every year, from US$ 1 billion in 2020, to US$ 2 billion in 2020, US$ 4 billion in 2020, US$ 10 billion in 2020, and US$ 15 billion in 2020.

Binary.com’s declining market share

Whereas in 2020 Binary.com (then called BetOnMarkets.com) had about 80% of the market, by 2020 Binary.com’s market share had dropped to less than 10%, because we found it hard to compete with the call-centre operators. Binary.com has never operated a call centre.

The crackdown

The unscrupulous activities of the Israeli binary options companies led over time to innumerable complaints by their clients to the financial regulators in their home countries. It took time before these financial regulators took action, but finally in 2020 the tide turned and financial regulators, led by the AMF in France, started seriously investigating the binary options industry. The catalyst for this was the efforts of the Times of Israel, who in March 2020 wrote an article entitled The Wolves of Tel Aviv, and has followed it up with several more articles to date. The suicide of a Canadian client of an Israeli binary options firm also focused public attention on the industry and pressured governments and regulators to take action.

The Israeli government, realising that Israeli companies cheating hundreds of thousands of people around the world was not good for Israel’s image and that it could lead to an increase in anti-semitism, also decided to crack down on the industry. In February 2020, Israel declared that it was preparing a law to completely ban the industry in Israel. In anticipation of this, a number of Israeli binary options companies have been closing down their Israeli operations.

Japan

The binary options industry in Japan has followed a very different route. In 2020, the Japanese Financial Services Agency (FSA) decided to start regulating binary options. Its nine local offices are responsible for regulating each of their respective jurisdictions, with the Kanto Local Finance Bureau (KLFB) being the largest. Regulated entities are also bound by the Financial Futures Association of Japan (FFAJ), the industry’s self-regulating entity.

The Japanese authorities published very strict industry rules and guidelines (cf. conduct rules and guidelines, which apply on top of the already very stringent regulatory framework for regulated entities.

Presently there are nine companies licensed to offer binary options in Japan: FXTrade, ClickSec, YJFX, FX Prime,
Min-FX, Hirose,
Forex Exchange, IG, and Binary.com.

The extremely stringent regulation and oversight is having two effects:

Clients of the regulated entities are very well protected;

Because of the very tight restrictions on regulated entities, many Japanese investors decide to trade with offshore binary options companies instead, since they offer a wider range of options (especially shorter-term contracts), which put the regulated entities at a competitive disadvantage.

Therein lies the perennial dilemma for financial regulators in the modern era: if regulations are too tight, clients will start trading with offshore firms instead, whereas if regulations are too loose, crooked operators will take advantage.

The way forward

The current trend is for financial regulators in the EU to ban, either partially or completely, binary options in their jurisdiction. For example, Belgium has banned them completely, France has banned their advertisements, and the Netherlands has done the same.

This may not be the ideal approach. The example set by Japan shows that regulation can be effective for binary options, just like for any other financial product. The fundamental problem is not binary options per se, but the operation of call centres where unscrupulous operators cold-call potential investors – whether it be for penny stocks, binary options, FX trading, or any other volatile financial instrument. It’s the call centres that need regulating.

However, the increased scrutiny of binary options in the EU may still work out in favour of legitimate brokers who have a proven track record of operating at the highest standards of regulatory compliance. Greater consumer protection and regulatory oversight means that brokers who play by the rules no longer have to compete with the corrupt practices of fraudulent brokers.

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    2nd place in the ranking!

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