Cyprus: Welcome to licensing binary options. Better late than never!

May 14th, 2012

W.K. Solomon

Trading binary options as a form of derivatives is the simplest and purest of investments. The binary options trader takes a position predicting that at a given future time, the stock, index, currency, or commodity selected will be up or down. The investor can predict an increase or decrease in value 5 minutes away or a month away. Exchange Traded Funds are the closest thing traded on stock exchanges to investing online in binary options positions as are all the trades on the derivatives driven Chicago Mercantile Exchange.

Licensing and regulation of the heretofore unregulated activities carried out by the numerous “binary options brokers” operating out of Cyprus is welcomed and really overdue. Binary options brokers who chose to set up in Cyprus already raise a cloud of suspicion as Cyprus has not exactly got a stellar reputation to begin with, far from it, so why set up a binary options company there in the first place?

A number of Cyprus binary options “brokers” which have popped up have chosen to be neither licensed nor regulated binary options platforms, choosing to operate from Cyprus, widely considered to be a corrupt legal jurisdiction with a poor reputation for rule of law, particularly compared to nations such as the United States, Canada, and Great Britain. However the Cyprus Securities and Exchange Commission earlier this month announced that it will begin to regulate the binary options brokers that have been operating under the lawless shelter Cyprus has been providing. This is a most welcome development. Binary options brokers that are not licensed or regulated make the entire industry look bad. Notorious for mistreating customers on trade pricing, closing down while  leaving customers holding the empty bag, paying out as little as 65%-70% per winning ITM trade, and a whole slew of shady practices, Cyprus binary options brokers in particular have sullied the binary options industry. Why would any educated trader choose to trade with a binary options platform that is not licensed and regulated, moreover why would traders choose such a Binary Options platform located in Cyprus of all places?

Licensing and regulation of binary options trading means governance and regulatory controls on the binary options companies and how they operate. The most important question any binary options trader should ask themself before providing funds to a binary options website for binary options investments is first of all, is the website licensed, regulated, and monitored at all? And if it is a regulated binary options platform, does the license and regulation come from a reliable, trustworthy legal jurisdiction where that country’s government stakes its reputation on the line?

Unfortunately for Cyprus binary options brokers, the notoriety of Cyprus for corruption and the absence of the rule of law will be a difficult reputation to overcome. Countries like Great Britain jealously guard their good reputations, only granting such licenses after vigorous vetting and consideration of the personal and professional repute of those applying to become licensed and regulated within that jurisdiction because once licensed those binary options companies then put Britain’s reputation as a regulator on the line. After a license is granted, the British government licensing authority closely monitors its licensees to ensure the utmost propriety, seriously investigates complaints, and shuts down any binary options operators who engage in any dishonest practices. Can the same be expected of Cyprus binary options companies, or will this be a lip service to licensing and regulation of Cyprus binary options brokers without any real benefit to BO traders?

If all that Cyprus intends is to just hand out to the existing Cyprus binary options brokers,  a piece of paper from the Cyprus government for them to frame and hang on their walls, and then just carry on their operations exactly as they had prior to becoming “licensed in Cyprus”, that does absolutely nothing to clean up the mess which Cyprus has to date been condoning for the binary options brokers operating in Cyprus. Like cleaning up a Wild West lawless zone, Cyprus should take the licensing opportunity to run many binary options platforms operating there “out of Dodge”. If they are serious about cleaning up their own back yard, Cyprus would do well to follow the example of Great Britain: vet the applicants stringently, dispense licenses sparingly and only to those who demonstrate the highest ethical standing, monitor binary options operators closely, and shut down shady operators immediately.

Marketsworld.com remains the world’s foremost appropriately licensed and regulated binary options trader, licensed in the British Isles, under the strict control you would expect from the British Justice system. The accounts of Markets World customers  are strictly controlled—are essentially trust accounts—and investors know for certain that if they succeed with their binary options trading, payment to them of their full earnings entitlements will follow. Customer funds are held in segregated accounts so that payment to all customers of their full entitlements is assured and protected at all times. Total transparency of trade pricing and a fair complaints process is in place and overseen by a reliable British Isles Government Regulator. Precisely the kind of monitoring and control one would expect the government to require of businesses holding investors’ funds in their trust, to ensure binary options companies such as Markets World are following rules and protecting investors from unfair practices. If history tells us anything, it is that with or without a license binary options companies operating in Cyprus are not as reliable or trustworthy, the justice system is Cyprus does little to instill investor confidence in the rule of law or appropriate action by the Cyprus government officials.

Whereas Markets World binary options trading platform is licensed and regulated in Great Britain and Markets World got its license to operate prior to launching its regulated binary options trading platform, Cyprus will now become another jurisdiction to license and regulate binary options trading. The world’s binary options traders should be pleased. If Cyprus is serious about strict controls, the vetting and licensing process has to take any applicant company in the range of a year to clear the various banking, and regulatory checks however already we see within only weeks companies which had been operating their already appear to have a Cyprus license, presto! And a second angst should arise: How much money will you invest in the honesty of Cyprus. Angst about reliability and corruption free officials ranks ahead of registration in Kazakhstan or Zaire, but Cyprus licensing is not exactly as reliable as the stamp of approval from Queen Elizabeth II.

Markets World’s licensing requires a Board of Directors resident in the British Isles, banking in the British Isles, careful vetting of all principals of the business by the government regulators, business plan analysis by the licensing body in relation to safety, reliability, and fairness, regular inspections, sometimes spot inspections, sequestered and monitored player fund protection, government complaint services and monitoring. These were directions which Markets World decided were necessary to take, and while this adds to the expense of operations for Markets World, the added customer protection is paramount because binary options traders rightly want and demand that level of comfort and safety, and it is worthwhile for Markets World to have the eyes of a trusted government regulator inspecting operations and thereby providing additional customer protection.

Not being paid when you invest successfully is a risk no investor should face. But it happens! A related online example is Full Tilt Poker which had between US$150,000,000 to US$390,000,000 in its customers’ accounts and announced on June 29, 2011 that operations were being suspended. The customers stand to lose as much as US$390,000,000. What the Americans call a “class action” – an action on behalf of all customers, is underway, but the chances are good that this improperly monitored and controlled website has lost US$390,000,000 for its customers.

Full Tilt Poker went under, costing its customers US$390,000,000. Should the intelligent binary options trader ignore that Lehman Brothers went bankrupt in 2008. Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo and Alliance & Leicester all came within a whisker of going under and had to be rescued. J.P. Morgan almost failed.

The financial collapse of a binary options company, without investor money in protected sequestered, and segregated accounts, is simply a risk that binary options traders should not take, and  need not take, when there are reliable and reputable binary options companies such as Markets World already operating. So why settle for less?

Why is Marketsworld.com the only binary options platform where BO traders are fully protected? Because other companies cannot or will not meet the licensing  and regulatory requirements binary options traders should care about and do care about. We salute Cyprus for deciding to clean up its back yard. Late is better than never!

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