Upcoming CySEC's New Regulations on Binary Options Brokers

CySEC has released its proposed regulatory reforms for binary options industry in Cyprus. According to Demetra Kalogerou, Chair of CySEC, the binary options now has had its serious deficiency and lack proper and adequate protection for retail investors to trade in high risk complex financial instruments.

This announcement was not officially in effect yet but was in consultation stage until March 3rd, 2017. After this date, CySEC will issue the definitive regulatory frameworks in official circulation.

The main purposes of these new frameworks are to help protect retail investors from fraud activities from the brokers and also to give full transparency to retail investors and ensure that brokers act in a fair, honest and professional manner. It is also surmised that this new reform was resulted from many complaints submitted to CySEC by retail investors.

We don't see this regulations in effect to the world wide binary options but we expect that the regulatory bodies of other countries will soon follow through. Cyprus is a well-known place for many binary options brokers so this regulation if passed will cause changes to many brokers there such as 24option, Stockpair, BDSwiss, Optionfair, EZTrader, Grand Option, HighLow, etc.

There are 5 new proposed regulations.

• Removing opaque strike pricing: strike prices must be the same for all clients and floating strike prices are not permissible.


• Quoting potential outcomes real-time: prices must be quoted as an evolving bid-ask spread, representing clearly the percentage probability of an outcome occurring.


• Lifting restrictions on exiting trades: CIFs must provide continuous, two-way pricing and clients must not have to wait until the contract’s point of expiration to exit the position.


• Banning sub-5 minute tenor trades: in order to remove shorter-term volatility and protect against “binary bets”, contracts must have a minimum expiration of 5 minutes.


• Standardizing trading and settlement methodologies: algorithms for the calculation of expiration and settlement values of the underlying market must follow CySEC’s predetermined methodology. Individual methodologies are not permissible.

If binary options is to continue its service, there will be changes to it inevitably. However, this change will favor retail investors and with these changes, binary options will become a more investing instrument rather than gambling in nature. Most retail traders first come into binary options with very little knowledge and the way it works looks simple but to succeed consistently, it is a hard job. Now we will wait and see how these changes will unfold.