Cyprus Watchdog Takes a Bite Out of Short Term Binary Options

Among the new legal practices that CySEC says are intended to help binary options traders, there are some that the

In recent years many binary options brands have established themselves in Cyprus because of the country’s status as an online trading hub, offering easy access to all European Union markets through the continent’s license passporting agreement. Now that whole business ecosystem might be shaken as local regulators appear to have suddenly become much less welcoming.

The Cyprus Securities and Exchange Commission (CySEC) today sent out a letter to investments firms under its jurisdiction with proposed changes in the regulatory framework. The watchdog says that the document was sent to binary options trading providers in order to let them know that they must offer full transparency and operate in a way that is fair to clients. However, some of new legal practices included will outright interfere with the popular fast paced action many traders like the most about the instrument.

With the aim of increasing transparency, always a good thing for clients, CySEC lists a number of new requirements. Among those: brokers will be required to provide identification of the underlying asset, including the trading venue and bid and ask or last prices of the underlying assets;  bid/ask, and/or last, prices at the expiry of the binary option, as well as an “adequate explanation” of the expiry price and the methodology used to determine it.

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Hurting the business model that makes short term binary options possible, CySEC also requires brokers to provide clients with an option to cancel a transaction a “reasonable time” after execution, which it defines as not less than five seconds after the purchase of the binary option. Taking the next logical step, CySEC writes plainly that binary options with durations of 30 and 60 seconds are not considered to fall under the law regarding investing services.

The regulator tells firms to immediately review their procedures in the trading platforms and ensure that these are in line with the law. Where they consider that additional arrangements are necessary, brokers are requested to do so immediately and not later than three months from today.

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