The popularity of the binary options market is growing every day, and by 2023 it has regained enormous popularity due to the COVID19 pandemic and the massive closure of businesses. In 2023, with more and more brokerages offering services in this industry, the challenge is how to control such a fast-growing and large area. For this purpose, there are different licenses for binary options brokers, which are issued by regulators.
Binary options broker licenses are needed at a minimum because companies are divided into “white brokers” and “black brokers” . The latter in the field of trading are represented by fraudulent companies whose activities are aimed at seizing the money of trading clients by any fair or dishonest means. Therefore, when choosing a reliable binary options broker, every trader should look not only at the trading conditions, quality of support and trading platform , but also whether the broker is regulated by any regulator. It is the license of a binary options broker that determines that among market participants there is a certain regulatory body that monitors the work of the broker.
Often, in the eyes of beginners, a license looks like a panacea for obtaining quality services, but, unfortunately, this is not always the case, especially when it comes to binary options. Licenses for binary options brokers are not issued by the state, and therefore cannot guarantee 100% protection. And also, licenses do not always protect the trader from fraud on the part of the broker. Next, we’ll talk about what types of binary options regulators there are, and which binary options broker license is best for a company to consider in order to protect your deposit.
Binary options broker licenses 2023: types and regulators
With trillions of dollars flowing through the Forex market, most regulatory agencies are involved in licensing Forex brokers. But some of them also work with binary options brokers. The most popular regulators in 2023 are:
- KROUFR (Russia);
- TsROFR (Russia) ;
- FCA (UK);
- CySEC (Cyprus) ;
- MFSA (Malta);
- LFSA (Labuan);
- BVI (British Virgin Islands);
- VFSC (Vanuatu).
However, binary options brokers most often receive licenses from the regulator TsROFR or CySEC.
The listed regulators resolve controversial situations to one degree or another, but not always in favor of the trader, and in some countries they cannot exercise their powers at all. The difficulties mainly arise from the nuances of the legislation of these countries. For example, traders from Russia and other post-Soviet countries need to rely on only two regulators from this list - the European SuSEC and the Russian Central Financial Markets Authority. Therefore, next we will consider the work of these regulators in more detail, and also find out why honest binary options brokers need a license.
Binary options broker license from CySEC
CySEC is the Securities and Exchange Commission, headquartered in Cyprus. Having a binary options broker licensed by this regulator means that the company has passed the verification procedure and has all the permits to operate in European countries.
Main functions of the CySEC regulator:
- Licensing of Forex and BO brokers ;
- Monitoring the work of the Cyprus Stock Exchange;
- Suppression and investigation of financial violations;
- Involvement of specialized agencies in the investigation;
- Request for information at the request of law enforcement authorities of Cyprus and the EU;
- Imposition of various sanctions on violators;
- Creation of regulations in the field of binary options trading;
- Applying to the courts to suspend illegal transactions;
- Interaction with certain authorities.
That is, a binary options broker license from CySEC positions the broker as an honest and transparent company that provides the same trading conditions for all traders.
Considering the strictness and unshakability of European Union legislation in relation to financial fraud, a binary options broker with such a license is the most trustworthy. In case of disagreements with the broker, the trader can freely contact the regulator. What is important is that even the most famous brokers are afraid of complaints to CySEC, since reputation is most often more important than money and comes to the fore. Therefore, the management of brokers licensed by the Cyprus regulator is aimed at retaining their clients and making their trading more comfortable.
What other guarantees does CySEC give to traders? The regulator promises full compensation of trader funds in accounts up to $20,000 in the event of broker bankruptcy. In accordance with the European Law on Investment Activities and Regulated Markets, all brokerage companies, including binary options, are required to participate in fees for the compensation fund. It is from this fund that CySEC takes funds to cover traders’ losses from the dishonest activities of brokers.
Binary options broker license from CROFR
TsROFR is a Russian regulator that was founded in 2011. Since in Russia the law on binary options trading is still under development, and it is unclear when it will come into force, the non-governmental organization TsROFR has taken on the role of a supervisory authority of the binary options market.
The main feature of the binary options broker license from the Center for Financial Markets is that it is issued for a period of one year, so all certified companies must renew the license every year by undergoing a new audit.
The “other side of the coin” of such conditions is that any broker can turn from a licensed company into a standard broker without a license if he refuses to extend the regulation. If a company suddenly loses its license, it is worth understanding why, since it may be dangerous to continue working with this broker.
In order for a broker to obtain a binary options license from the Center for Financial Markets in 2023, it is advisable for the broker to have all these criteria:
- Be successfully operating for at least six months;
- Have representative offices in several countries;
- Provide your services to at least 5,000 clients;
- Have the necessary package of documents to obtain a license;
- Have a high-quality trading platform that ensures proper security of customer data.
But these are not the only criteria and the regulator checks a lot of other information about the company. It is also worth noting that obtaining a license from a binary options broker takes a lot of time and this is not done in one day.
The main advantages of a binary options broker license from the Center for Traders for Traders are an insurance fund and protection. Thanks to the insurance fund, which guarantees traders compensation for lost funds due to the fault of the broker, each trader has the opportunity to return their funds, but this amount has a limit and cannot exceed $5,000 per person. The protection is due to the fact that if a broker violates the rights of traders or commits fraud , then a complaint can be filed against him with the regulator. And if the broker’s guilt is proven, the regulator will compensate the trader for losses, and at the same time fine the broker or even deprive him of his binary options broker license if the violation is very serious. Therefore, binary options brokers who have received certificates of compliance with the Center for Financial Markets must comply with all the standards that were specified in the agreement during certification.
There is one drawback to having a binary options broker license from the Center for Financial Markets. Since TsROFR is a non-governmental organization, it is in no way regulated by Russian legislation. For a trader, this is fraught with the fact that it is impossible to appeal the regulator’s decision to higher authorities belonging to the state.
Binary options 2023: licensed brokers
The absence of a broker's license in 2023 does not mean that the broker is a fraudster. But brokers with a license have a better chance of being loyal to traders, and its presence can add image and seriousness to the company and show that the binary options broker plans to have long-term cooperation with its clients.
You can find companies with licenses from various regulators in our rating of verified binary options brokers . The most popular licensed brokers are Pocket Option , Quotex and Deriv (Binary.com) . Separately, it is worth noting the Deriv broker, which has as many as five licenses from various regulators. You can also note the broker Binarium , which previously had a license from CySEC, and at the moment the broker is deciding whether to renew this license or get a new one from the Center for Financial Markets.
Binary options brokers licensed by the Central Bank of the Russian Federation
Many traders would like to trade binary options through a broker, which in 2023 is regulated by the official regulator in Russia - the Central Bank. But, unfortunately, there is no legal basis for binary options as a financial instrument and therefore, at the moment, not a single broker will be able to obtain a license from the Central Bank of the Russian Federation even if they wanted to.
Therefore, it is worth considering brokers with other licenses, which, although not comparable to the Central Bank, still allow brokers to operate and provide some protection for traders.
Conclusion
Although non-profit regulators are inferior to the Central Bank of Russia in the context of protecting the rights of a trader, the same Central Federal Financial Markets Service has one big advantage for Russian-speaking traders. This regulator positions itself as a Russian regulator, which means that the procedure for filing a complaint looks simpler, since a trader can submit his appeal in a language convenient for him.
Be that as it may, you need to know that the ideal regulator in 2023 does not yet exist. Therefore, when choosing a binary options broker, you should pay attention not only to the regulator, but also carefully study the reviews and comments of other traders who have already tried trading through your potential binary options broker.
See also:
To leave a comment, you must register or log in to your account.