Binary options brands switching to FX as the net closes in on them? This will never work
As the net closes in on the fraudulent binary options sector, many brands are now attempting to make a step toward offering FX. When bearing in mind how Tier 1 banks are restricting genuine liquidity to well established firms, the understanding and knowledge that is required to run a bona fide FX firm, and the complete difference in background and career path of leaders, these claims should be viewed with extreme caution
“A man is known by the company he keeps” – Aesop
Retail binary options brands have been the bugbear of the electronic trading industry ever since their sudden rise to global notoriety in 2011, assisted by Cyprus based financial markets regulator CySec’s somewhat naive decision to regulate them as financial markets participants offering a genuine financial markets instrument.
Just five years later, a litany of appalling cases of fraud, theft of money and misrepresentation adorn the internet, largely due to the absolutely deceitful nature of binary options, which masquerades as a financial product which can be traded via an electronic retail platform, but in actual fact is a weighted system that intends to steal money from unsuspecting members of the public, and has its roots in the affiliate marketing, gambling and lead buying (and in some cases lead stealing) back street industries.
Many national regulators and government authorities have this year placed an outright ban on binary options, those being France, Denmark, Belgium, Israel, Germany, Holland and of course the very first nation to instigate a blanket ban on solicitations by OTC binary options firms, the United States.
The sanctioning of payment processors that facilitate the transfer of capital via credit card has now begun, with PacNet and its associated entity Counting House being sanctioned by the US Treasury and listed as a criminal organization and remarkably, WorldPay, a vast generic payment processing firm, having been sanctioned by the French government for facilitating payments to nefarious parodies of electronic trading firms.
In Israel, where binary options is illegal, reside the majority of binary options platform firms and market makers, as well as their associated brands. These firms conduct their business outside Israel, often via offshore registered entities and structure their businesses via several layers of shell companies.
As the net closes in, and regulators and lawmakers, as well as national media slate binary options, many firms are now looking to move away from binary options and into FX and CFD trading.
It is fair to make a calculated prediction that there is absolutely no possible means by which any such firm will be able to move from binary options into FX and CFDs.
Firstly, the entire structure of a binary options brand differs immensely from that of a FX brokerage.
This difference starts from the very core of the establishment of the companies in each sector.
The career paths of senior executives among Britain and America’s FX and electronic trading firms are publicly available and are an instrumental part of the provenance of the companies that they lead.
The career paths of those which head the companies in the binary options sector are also a complete contrast to those in the genuine electronic trading business.
Far from the private school education, internships, and years of experience with large, global blue chip companies, many of the binary options companies do not have shareholders or public reporting obligations, and are indeed owned by one or two people, who often do not disclose their identity.
The understanding of operations and business model employed by many binary options firms is also representative of a complete dichotomy from those operating correct electronic trading firms, largely because the retail FX and binary options industry in Israel did not rise up from the interbank or technology sectors that it did overseas, and was not established by financial markets professionals with strings of qualifications and shareholders to report to.
Instead, it was a spin-off from the huge gaming, affiliate marketing and sports betting businesses that are set up in Israel that market their services to retail gaming customers overseas (gambling is illegal in Israel).
These binary options firms are often placed in the same category as gaming, sports betting or rebate marketing because they are often operated on the very same principle, by people who own a brand privately and had generated enough capital to buy a closed-system MetaTrader 4 license and recruit sales people in various languages (usually French or Arabic) to sell, under pseudonyms and pseudo-locations, retail FX to customers from a lead list that had been recycled from gaming firms.
Therein lies a huge barrier and problem in transitioning between binary options and FX.
Explaining how to generate a relationship with a prime of prime brokerage and sustain it to an owner of a binary options brand would be like trying to explain Pythagoras Theorem to a monitor lizard.
People who are willing to steal leads from their previous employers and then hawk them on the internet, or steal money from unsuspecting members of the international public and operate a weighted casino are not interested in how FX order flow is processed, how MiFID or EMIR reporting is conducted, how post trade clearing and processing can be achieved efficiently, how an aggregated price feed works or, actually any form of investment or future planning.
Binary options is ‘grab it and run’ whereas retail FX is a highly sophisticated relationship business that requires complete understanding of the entire structure of a trading system and all of the companies and entities that make up every component.
To get a prime brokerage relationship today requires at least $50 million in capital and a full understanding of how to process orders in tandem with the requirements of Tier 1 liquidity providers. Binary options brands are so far removed from that ethos that it will never happen.
Therefore, the current bravado which is being displayed by large brands, many of which are operated by people who have had their collar felt by the long arm of the law more than once for the fraudulent nature of their business, is exactly that – bravado.
It is clear that absolutely none of the binary options brands that are now finding the environment far too hot for them and wish to quickly obtain a MetaTrader 4 white label license and then pretend to offer FX and CFDs whilst operating a completely closed B-book and recycling leads from their often commonly owned gambling sites in order to internalize orders as there is no way a prime of prime will ever do business with the gold chain-wearing, hair gel-toting owners of binary brands whose names are already publicly written as
It is quite fair to assume that, if taking these firms to a due diligence inspection by a compliance department of a London based prime of prime, the decision would be no.
TRADOLOGIC, one of the largest platform providers in the binary options business, has had one of its major shareholders arrested for money laundering and fraud.
Other major firms in the sector include Banc de Binary, which was subject to an $11 million fine from the CFTC for illegally soliciting US customers despite having been in receipt of a cease and desist order prior to the charges issued against the firm in 2013.
Anyoption, one of the largest brands, is owned and operated by Shay Ben-Asulin, who was charged by the Securities and Exchange Commission in America in 2011 for participating in pump-and-dump schemes and for engaging in a fraudulent scheme to conceal the sales of millions of shares of their companies, netting him and his 7 accomplices $33 million, yet he went on to found a large binary options brand after this, continuing to satisfy his thirst for ripping people off.
The lowbrow and criminal binary options business bears absolutely no resemblance whatsoever to the genuine, well established electronic trading business that exists in bona fide jurisdictions, hence any claims by existing or former binary options firms that they are branching into FX should be viewed with extreme caution…. that’s if they manage to do so before the powers that be finally close in on their operations once and for all.