If you want to start trading binary options, you should look for a licensed and regulated broker first.
Why You Need a Licensed Broker?
In the past binary options brokers do not need to get a licensed or get regulated but today, brokers that do not obtain an adequate license will be blacklisted. Being regulated means to be holding a license from an authority regulator such as CySEC. It also mean that the broker is expected to follow a strict list of rules outlined by the regulator.
Many brokers get regulated starting in 2012, when Cypriot Safety and Financial Exchange Commission (CySEC) announced that they will include binary options brokers in their regulatory legislation. CySEC requires every newly established binary options broker in Europe to submit an application for the license within a period of 6 months. Up to date, there are more than 100 binary options brokers on the internet but there is only a small selection that is regulated. There are many brokers who continue to operate even after their license has already expired
Advantages of Trading with a Licensed Broker
Choosing a licensed broker is safer because the broker is required to follow a set of rules that aim to protect the clients’ funds. For example, before a broker can successfully obtain a license, they must segregate the clients’ funds into separate accounts at a respected financial institutions.
Trading a regulated brokers can protect your finance and you also get a chance to file a lawsuit in case they are closed down suddenly. Brokers that are regulated will not try to cheat your money because they are governed by a set of terms. They are required by the laws to offer high quality binary options trading products at a fair price.
However, it doesn’t mean that unregulated brokers are scam. There are still lot of brokers who have submitted their application and waiting to be approved. As soon as the license is issued, the regulator will update its list of regulated brokers.
A licensed and reputable broker will be backed by a team of reliable customer support. You should be able to find the contact information such as toll free telephone number, email address and headquarter address on the contact us page. They usually also offer live chat support for traders for 24/7.
Different Types of Binary Options Regulatory
There are many different regulators that regulate binary options brokers based in different countries.
- CySEC (Cyprus Securities and Exchange Commission), the most popular authority regulator for binary options brokers, is based in Cyprus.
- AMF (Autorité des Marchés Financiers) is responsible for regulating binary options brokers that are based in France.
- The function of MiFID (Market in Financial Instrument Directive) is to regulate binary options brokers in Europe.
- FSA (Financial Services Authority) was established to regulate binary options brokers located in the United Kingdom.
- CFTC (Commodity Futures Trading Commission) regulates brokers that are in the United States.
- FMRRC (Financial Market Relation) is the authority regulator based in Russia.
What to Check When Looking for a Licensed Broker
When looking for a broker, the first thing you should consider is its regulatory status. Established and licensed binary options brokers usually do not accept traders from the United States. Therefore, it is advised that you choose binary options brokers that do not accept USA traders. However, there are also some good licensed binary options brokers that accept traders from America.
Sometimes, a broker that is licensed by CySEC can be a scam so you must always read reviews to confirm that they are legitimate. Traders who have been cheated by voice their complaints on the web so make sure you perform an extensive research to find out all the complaints towards the broker.
You can check out the top binary options broker review sites where you get to read expert reviews and recommendations on different binary options brokers.
The best thing is to do a complete research on the broker aside from just checking the regulatory status. For example, you should do research on factors such as deposit/withdrawal, types of accounts offered, availability of demo account, ease of use of the trading platform, minimum trade size and trading tools.
In conclusion, choosing to trade with a licensed broker is safer but it also doesn’t 100% guarantee that a licensed broker won’t cheat your money. If you are from the USA and would like to trade binary options, you should trade with an unregulated broker that has lots of positive reviews.