Bank of Russia prepares framework distinguishing binary options from derivatives

Maria Nikolova

The framework for regulating derivatives, which will cover the problem of binary options, is set to be ready in the fall.

Russia, where the binary options segment is not regulated, is a lucrative target for binary options fraudsters. The Bank of Russia still has not made any particular steps with regard to this problem, but Valery Lyakh, Head of the Bank of Russia’s Department for Countering Malpractice, has indicated that some measures to tackle this type of fraud are on their way.

Speaking to Financial One magazine, Mr Lyakh confirmed that the Bank of Russia is getting numerous enquiries about binary options from police officers from across the Russian Federation. Many of them need expert opinions on this topic.

However, Mr Lyakh conceded that thus far the Central Bank has not closed any binary options website, based on the fact that a website offers binary options, as the powers of the regulator do not spread over this type of instruments.

One of the problems highlighted by the official is that binary options in theory are like financial derivatives but in practice work like gambling instruments. That is why, the Bank of Russia plans to outline a framework for legislative changes concerning the regulation of derivatives. The document will cover the binary options problem, as binary options have to be differentiated from the “normal” financial derivative instruments. The document is set to be ready around the fall.

Also, the regulator is preparing an information leaflet about binary options that is set to warn the public of the risks associated with them.

Mr Lyakh suggested that an international action against pseudo-financial activities will most likely come from IOSCO. He noted the growth in the number of fraudulent companies being based abroad and offering their services to Russian clients.

According to estimates by the Russian edition of Forbes, Russia generated 29% of the traffic to four of the biggest binary options websites in April 2017. Forbes based its estimates on data derived from SimilarWeb.com. The data show that in April this year, the four platforms in question had more than 50 million visits. This means that Russia accounted for 14.5 million of them.

Estimates by Financial One magazine show that Yandex gets 100,000 queries about “binary options” each month.

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