Generally speaking, binary options trading is legal, but there are some exceptions to the rule. As long as you work with registered and certified binary options brokers who are transparent about what they do and how they do it, you will be good to go.
In all countries where binary options trading is permitted, the brokers must be registered with the relevant authorities that govern the binary options business in that region. Similarly, different instruments in the binary options portfolio should also be registered with the appropriate agencies and should provide the investors with the necessary documentation.
Nearly all countries worldwide recognize and accept binary options trading as a legal business. Most of these countries will either have legislative bodies that govern binary options trading or only accept brokers and instruments that meet certain ratings and qualifications.
Some of the main markets to trade binary options include:
- Japan
- USA
- Cyprus
- UK
- Australia
- New Zealand
- Malta
For new traders, binary options are a great way to begin their journey. For more seasoned players, it is an excellent way to diversify their portfolio.
The fact that there are a lot of binary options trading platforms around and how it is marketed as a simple yet potent form of trading often gets people wondering whether it's legal. Often, things that sound too good to be true have an expensive catch if investors aren't cautious. This article will cover everything you need to know about the legality of binary options.
Regulations
Before stepping into the binary options trade, you should know about the regulations governing both the traded instruments and the brokers and exchanges that facilitate the trading.
Initially, trading binary options was quite risky since there weren't a lot of regulations in place, there weren't even specialized regulators, and the binary options market was not very well mapped out. Over the past 20 years, things have changed a lot for the better.
This is not to say that not a single fraudulent or illegal binary option exists on the market, but if you are careful with how you get started, it's very easy to protect yourself from such problems.
First, ensure that you are working with a licensed professional, and second, check the licensing of the underlying asset. The binary options industry is littered with online trading platforms, so knowing which ones are the good ones in your region will help you make a better decision.
Furthermore, keep in mind that, in some regions, having a license from a regulatory body is necessary for a trading platform to commence business. It is highly recommended and even preferred in other regions, but it is not a legal requirement. In the latter case, you have to be more cautious in selecting a retail binary options trading platform.
If a broker is registered with a regulatory body, you can be sure that they will work according to the guidelines and sops the regulator has put in place. Such brokers will also be offering options that are legal and safe investments. This is the best way to not only protect your investment but also to get the best quality of service and make your binary options trading more profitable.
Is Binary Options Trading Legal in the US?
Yes. The US is one of the biggest and best markets to trade binary options. It's also home to two of the most well-reputed regulatory bodies for binary options trading. These are the US Commodity Futures Trading Commission (US CFTC) and the US Securities and Exchange Commission (US SEC).
However, getting a license from a regulatory body, especially the US SEC, is an expensive and time-consuming process. However, if you are interested in working with a licensed binary options broker in the USA, then NADEX is a good option to explore.
In fact, NADEX (North American derivatives exchange) is the only broker located within the US and has licensing from the US SEC. Another popular option is the Chicago Board Options Exchange, where you can trade CBOE binary options.
Alternatively, you could also work with offshore brokers or brokers located outside the US, giving you access to the American market to trade. US bodies may not have licensed these brokers, but that does not mean they are illegal.
In the US, companies are not required by law to license specifically from the US governing bodies. Instead, many of these offshore brokers have been licensed by European-based regulators.
EU-based regulators often have stricter rules and regulations than their US-based counterparts. Brokers who get EU licensing still conform to the rules and regulations that US regulators require, but they are doing so under the framework set by a different body. Therefore, they are allowed to trade in the US, and working with such brokers is a good idea.
Is Binary Options Trading Legal in Malta?
Yes. Malta has one of the world's most highly regulated financial derivatives regulations. They have their regulator MFSA (Maltese Financial Services Authority), and they also follow the EU's Financial Instrument Directive (MiFID).
In Malta, brokers must also meet a minimum net capital of $900,000. It can be much higher depending on the scale of the operations of the broker. If a broker meets the capital requirements, they are also required to meet several mandatory requirements by the MFSA before they can get a license.
Is Binary Options Trading Legal in the UK?
Yes. Since the UK is no longer part of the EU, the regulations in the UK are slightly different than the European Union and many other parts of the world. One of the most notable differences is that no specialized body governs or licenses binary options brokers In the UK; instead, brokers must be registered with the British Financial Conduct Authority (FCA).
Overall, there is no problem with UK citizens trading commodity binary options or any other kind of binary instruments.
The UK is also continuously improving and enhancing the regulations it has in place for binary options traders. The focus of these developments is the safety of the end user. This includes segregating funds in the brokers' account from the trader's capital, making the payment process swift and easy, various checks to ensure products are sold properly and improving dispute resolution processes.
Is Binary Options Trading Legal in Japan?
Yes. While binary options trading can be challenging in Asia, where markets are often not open to this form of business, Japan is an exception.
In Japan, you can easily find a binary options broker that is locally registered, or you can use an offshore broker like you would in the US. Japan has two financial agencies that regulate binary options.
The first is the Japanese Financial Services Agency (FSA) which overlooks all the financial operations in the country. The second is the Securities and Exchange Surveillance Commission (SESC), which ensures all financial businesses and service providers comply with regulations.
Is Binary Options Trading Legal in Australia?
Yes. Australia is authorized for binary options by the Australian Securities and Investments Commission (ASIC), one of the most reputable binary options regulators outside of the US. Additionally, ASIC has come up with several innovative solutions in the past that have helped improve the safety of the end users. These are solutions that have been adopted by other regulators as well.
Australia offers an excellent market with lots of growth potential for exchange-listed binary options. If you want to trade binary options in Australia, you have the option to work with offshore brokers who have permission to operate in Australia – so you aren't bound to local brokers only. If you want to work with a local broker, ensure they have a valid Australian Financial Services License (AFSL).
Final Thoughts
Binary options have come a long way in being recognized financial instruments in the past couple of decades. As the interest continues to grow in these assets, more regions around the world are permitting binary options trading.
If you are in a region where it is not yet regulated or recognized, you may still be able to trade. You just need to determine that it is not specifically stated by law that binary options is not permitted.
Unless it is prohibited, you're likely allowed to trade binary options – simply get in touch with a broker that can facilitate the trade and get you started.
