Dutch Regulator and Courts Battle as Binary Options Provider's Licence Restored

In a surprise ruling, binary options broker, Optieclub, is expected to receive authorization to offer financial trading products under Holland's

61f57c7f08b93fe6c0e9da508887e0acDutch binary options broker, OptieClub, will receive authorization as a regulated broker under the country’s financial watchdog after Dutch courts rejected the watchdog’s plea of refusing to regulate the firm.

A legal fight between the regulator, AFM and Optieclub, and a surprise turn of events have questioned the credibility of financial watchdogs in Europe and their decision making process. The latest decision could result in Holland becoming a new hub for binary options firms looking for sound regulation in Europe, thus signifiying the diverse nature of financial markets.

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Regulator Vs Broker

According to details filed on the government’s main website for legal affairs, AFM is to provide sanctuary under its regulator wings within two weeks to the broker. The details state: The judge of the Appeals for business (Tribunal) request refers to a preliminary injunction (from the regulator) the Authority for the Financial Markets (AFM) and OptieClub (translates as Option Club), a new decision in two weeks.”

The case was put forward by the broker in the District Court of Rotterdam and was based on a decision issued by the regulator on the 16th of January, 2015.

A binary options brokers, in its initial decision, the AFM refused to authorise OptieClub with a financial license, deeming the business to be resembling gambling, and thereby requiring a gaming license.  The AFM’s rationale for their decision was based on them considering binary options with short maturities as a game of chance.

The court note continues to explain the AFM’s views on the product which it deems unfit for users: “The AFM considers offering binary options to consumers as conduct that is contrary to what are acceptable standards in society, because such options are not cost-efficient, useful, safe and understandable.”

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The AFM’s opinion though went against previous MiFid opinion that was first published by ESMA which stated that binary options were in fact a financial product and fall under the governing jurisdiction of financial regulators.  That decision has been the foundation of EU regulators to have issued multiple warnings against non-regulated binary options brokers, with France being one of the most aggressive against unlicensed firms marketing in their country.

The case commenced in May 2014 when the AFM refused to issue a license, since then OptieClub has appealed and the matter is being settled in the courts. The last major hearing was on the 16th of January where the courts gave the regulator six weeks to make a decision, which was further appealed by AFM. However, the latest decision by the courts put additional pressure on the watchdog. Their latest decision rejects an appeal from the AFM and gives the regulator two weeks to make a decision, in addition, AFM is to pay legal fees for OptieClub.  Defending OptieClub in the case was attortney Bas Jongmans of the Gaming Legal Group, a Netherlands bases law firm assisting Dutch and Malta gaming and online trading firms.

Binary Options a Game-Changer

Binary options are one of the fastest growing investment products, although industry professionals are debating whether the product should be classified as financial trading or gambling. A number of retail FX providers have enhanced their offerings to include binary options, including Markets.com and Hantec.

Binary options products support the theory of gamification, a concept that identifies the next generation of investors that have roots in the gaming space, hence the growth of binary options.

The ongoing developments in the binary options space have resulted in interest into the workings of the product. Recently, authorities in the UK reported that the product was being reviewed with the possibility of the FCA taking the product under their banner. Cyprus was the first European nation to formally authorize the product.

On the other hand, authorities in Belgium and France have been bent on demonising the sector with France’s watchdog updating its list of non-regulated providers.

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