An article in the Financial Times Adviser states that once the Brexit materializes, the FCA will make the necessary steps to take permanent measures against binary options and CFDs aimed at UK retail traders. The FCA will therefore not have to mimic ESMA decisions anymore.
Binary options : FCA intentions
The Financial Conduct Authority has announced its intentions towards those infamous products : once the UK is officially out of the European Union, it will take measures to permanently ban binary options in the United Kingdom.
Consultations on the subject started in December 2018. 2 issues have been pinpointed by the FCA :
- Inherent risks of these trading products
- Poor conduct of some of the firms selling them
By March the FCA should publish a policy statement and a handbook rule for binary options, one month later for CFDs. The British regulator keeps working on several Brexit scenario to make sure decisions are enforced. In the event of a no-deal Brexit, to minimize the regulatory disruption caused to financial services firms the FCA will implement its new temporary transitional powers, awarded by the Treasury, broadly.
End of binary options trading in the UK?
If the ban mimics the measures actually taken by ESMA, it should not mean that binary options trading will be forbidden for British residents. It is the sale, marketing and distribution of binary options by FCA regulated entities to retail consumers that is forbidden. By doing so, th FCA will push individuals towards offshore brokers, which are generally riskier than local houses.
What’s the problem with binary options in the United Kingdom?
As the FCA pointed out, there are 2 issues with binary options: risk and poor actors.
Regarding the risk, it is indeed a high risk/high reward form of trading, so bad account management can lead to big losses. This is, however, true for other forms of trading, with high leverage. Or with many other activities that include staking, such as sports betting, lottery, gambling… Those are not, of course, in the scope of ESMA, but it is odd from a global legislative standpoint that certain activities leading to huge losses are allowed, and others are banned. Many people have fun in UK casinos because they play responsibly, should that be taken away from them because of a few people with addiction problems?
Second problem, the poor actors. While we can definitely agree with the assessment, the conclusion is again wrong. It’s no secret that the sector has been plagued with bad actors, this term being more often than it should a euphemism. But again, is banning FCA regulated brokers from selling such products the solution? With such decision, more than ever the doors will be wide open for unregulated brokers, outright scams to operate and lure UK consumers.
Trade safely binary options
Despite this deserved bad reputation, there are some honest brokers offering binary options products. Some are regulated in the US, for example Nadex. Others chose another path, which is fairness by design. For example, Spectre.ai allows its customers (not an obligation) to trade smart options directly from their cryptocurrency wallet. In case of win the money is instantly credited on their Ethereum wallet, out of reach of the broker. Another solution, much more popular, is the semi-decentralized wallet. How does it work? Funds are locked on the platform smart contract, again out of reach of the broker. Withdrawals request are processed automatically, without human intervention. In other words, fair profits can be withdrawn at any time.
This new way of offering binary options to traders in the UK, Europe, Asia and all around the world except the US and a few other countries, guarantee to retail traders a safe and fair trading environment. You won’t be called by pushy sales rep (Spectre does not employ such people), all you get is access to a top notch digital options trading platform that features advanced risk management tools. When setup properly, you won’t be able to overtrade, or lose too much money. RIght now fiat trading is not available, but it will be soon, when Spectre has proven that it can be trusted.
Want to know more? Read our Spectre platform review.