Are There Logistical Difficulties In Reporting Binary Options Trades?

The first hurdle to be crossed is to decide whether to report them at all. Regulators are taking different approaches.

The suggested reporting pattern for binary options is covered in some detail in an earlier article. However, the first hurdle to be crossed is to decide whether to report them at all. Different national regulators are taking different approaches on this matter, with the UK’s FCA believing that these products are more akin to a fixed odds bet than a financial product, and that they are therefore not currently reportable. If you decide to report regardless (or if your local regulator takes a different view) you will find very little guidance available, outside of the 12-step guide in the above article.

Binary Options Destined For Regulatory Green Zone?

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Areas to be particularly wary of are the population of price and notional amount, which can be seen to have the same value, the use of the entry price as the strike price in the option-specific fields and the population of underlying contract details in a way which respects the various constraints introduced by the ESMA Q&A (such as use of both Notional Currency 1 and 2 for FX contracts and use of NA in the underlying field for FX, Interest Rate and Commodities contracts). Taxonomy E is sufficiently flexible to accommodate these products, but binary options brokers may do well to consult outside of their own immediate circle to ensure they settle on a reporting pattern which will keep them in the regulatory green zone.

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