According to Japanese leading financial newspaper Nikkei the Financial Futures Association in consultation with industry opinion leaders and the Financial Services Agency has decided on the framework of binary options regulation. This is not an official statement from any of these organizations but may not be far from the truth and should include the following rules:
- High/Low type of binary options will be prohibited because it is viewed as gambling, not as financial trading
- Option’s time length will be regulated (for instance 60 seconds or other short term options may not be allowed)
- There will be limit for allowed trade volume and maximal loss amount per day per person
- Spread in options will be prohibited, meaning that only options with same base price whether you pick up or down will be allowed
- If brokers stop accepting orders for certain options (for instance due to excessive exposure) they will have to disclose the specific reason on the their webite
- Forex brokers have to disclose the total profit and loss of whole customers
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If indeed approved this will considerably curb the massive trading volumes of binary options in Japan. In Japan the options became a very hot product and some brokers report over $10-20 million in deposits per month – which revived the struggling Japanese forex market. In comparison the whole foreign binary options market may be less than $15 million in deposit per month. The new rules however will certainly make binary options less appealing and hence will reduce the deposits and trading volumes. The only other jurisdiction actively regulating binary options is Cyprus following a decision taken in May 2012.
Nonetheless, the Japanese forex market is red hot with M&A activity. Only yesterday Yahoo Japan acquired one of the country’s leading brokers CyberAgent FX for $254 million.