FFAJ Publishes Final Proposed Binary Options Guidelines

Following reports that Japanese binary options regulations is forthcoming, the Financial Futures Association of Japan (FFAJ) has published the Final Report of the proposed rules. To analyze the product, a Binary Options Working Group was created, that was administrated by the FFAJ, with input from leading Japanese retail Forex brokers, and oversight from the JFSA and local exchanges. As a self-regulating entity, the FFAJ’s initiation of the working group is a means of providing an agreed upon framework of proposals that can be sent to the JFSA to become adopted rules.

Proposals include:

Minimum trading period of two hours (possibly the greatest disruptor, as it nullifies the entire slate of short term products currently being marketed)
Clear information explaining the product with warnings that include “principal will be zero if the projection went wrong” and “The difference of the amount paid and amount received by all customers is the source of profits of a firm”
Disclosure of customer profit and loss which includes both the ratio of total profit and losses, and the percentage of traders losing money
Rules for advertising which prohibit the use of Marketing the product as an “easy investment”
Enforcement of “Know Your Customer” answers to questions such as whether the client has sufficient knowledge to invest in binary options and upper limit of losses they are willing to take
Setting of common strike prices for each contract (this bans the using of present prices to set the strike price)
Fixed payouts are set throughout the lifetime of the option, with only the value of the option changing value
Brokers are prohibited to suspend or delay trading without reasonable cause, and in such a case that a suspension in made, explanations to customers need to be published on the firm’s website
Rules for data collection and monitoring of how products are priced

With the FFAJ finishing its report, the proposal now goes to the JFSA for final review with expectations of a summer implementation

FFAJ Binary Options Working Group Report

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Proposals include:

Minimum trading period of two hours (possibly the greatest disruptor, as it nullifies the entire slate of short term products currently being marketed)
Clear information explaining the product with warnings that include “principal will be zero if the projection went wrong” and “The difference of the amount paid and amount received by all customers is the source of profits of a firm”
Disclosure of customer profit and loss which includes both the ratio of total profit and losses, and the percentage of traders losing money
Rules for advertising which prohibit the use of Marketing the product as an “easy investment”
Enforcement of “Know Your Customer” answers to questions such as whether the client has sufficient knowledge to invest in binary options and upper limit of losses they are willing to take
Setting of common strike prices for each contract (this bans the using of present prices to set the strike price)
Fixed payouts are set throughout the lifetime of the option, with only the value of the option changing value
Brokers are prohibited to suspend or delay trading without reasonable cause, and in such a case that a suspension in made, explanations to customers need to be published on the firm’s website
Rules for data collection and monitoring of how products are priced

With the FFAJ finishing its report, the proposal now goes to the JFSA for final review with expectations of a summer implementation

FFAJ Binary Options Working Group Report

// <![CDATA[

var docstoc_docid="154101713";var docstoc_title="FFAJ Binary Options Working Group Report";var docstoc_urltitle="FFAJ Binary Options Working Group Report";