Binary option trading is an activity that is very popular with traders. This popularity is probably due to the fact that this practice is governed by simple rules, accessible to all. The regulation of this highly valued market has just undergone various changes by CySEC, changes that are worth knowing. In particular, brokers working in this field are required to comply with the new standards, as they aim to offer more equity to traders
New rules for trading binary options
The Cypriot regulator CySEC recently issued a circular that unveils the rules now in force for trading binary options. This innovation brings a real upheaval for brokers, who will have to change their business model. An important update of online trading platforms is particularly important.
While the regulations that are now valid are quite demanding and restrictive for brokers, they are advantageous for traders who can be reassured. Indeed, transparency is now required.
What will change with the new regulations
What will change? Essentially, the change lies in transparency. At what level? In terms of relations between binary option brokers and investors. Traders have the possibility to obtain important data on all their contracts. At the same time, brokers must apply a mode of operation that focuses on the equity of their clients. It should be noted that the new rules only apply to very short-term binary options with a delay of no more than 30 seconds.
Given the fairly significant changes that will be applied to the platforms, a deadline has been given to brokers (notably July 2016). Software publishers were involved.
More transparent exchanges?
It was following recurring complaints from investors in Europe that the decision to implement new measures was taken to improve the legislation on binary options. The objective is to improve the transparency of the operation of online brokers. It should be noted that several aspects of option trading are affected by the transparency required by CySEC. In particular, there are rules relating to the underlying assets and involving easier identification of the latter by the trader. The broker will have to disclose not only the prices, but also the entire futures contract and its details.
Other important rules
Among the changes that will undoubtedly benefit investors is the improved order cancellation mechanism. In practice, the trader has the possibility to cancel an order within 3 seconds. This allows the investor to change his mind if he does not agree with the execution price. In the event that the broker wishes to apply a redemption option on a trader’s order, he must provide the method used to determine the terms of that action. Ultimately, CySEC’s objective in implementing such rules is to avoid the abuses that traders often suffer when dealing with binary options.
Finally, it is important to note the change in price flows that can now be known to customers. Previously, brokers only disclosed the current price. With the new rules, they must also show continuous flows, informing traders about the spread (buy and sell) until a binary option expires. The customer must be able to read this information at the same time as he/she reads the option price. Better still, he is entitled to explanations on the determination of tariffs, but also on suppliers. Finally, once the binary option has expired, traders can find out about the different tariffs applied.