CySEC has binary options in its sights
As regulators and mainstream media bears down on binary options, technology and brokerage models must evolve.
For the past few months, we have been discussing the heightened pressure under which Forex and Binary Options brokerages find themselves. Stronger and fiercer competition, higher acquisition costs and stricter regulation and enforcement represent great challenges for brokerages.
It’s not only us speaking about the challenges faced by brokerages in the industry; CySEC has been making headlines with its over-reaching ambition of becoming a high-brow regulatory entity in Europe. Between new regulatory guidelines and a stricter approach reflected in several fines issued and settlements entered into, the Cyprian regulator has been getting tons of ink in both financial and mainstream press.
Though the entire financial industry has seen significant changes in regulation, it is the binary options sector that has been under the spotlight most recently. Binary options has traditionally been an industry of higher risk that FX and with a business model that features a “boiler room” style sales cycle, and as such, has received the short end of the stick when it comes to press coverage both in print and broadcast.
As for CySEC, the regulator seems to have been severely focusing on the binary options industry with new rulings concerning call centers and liquidity providers.
The regulatory entity’s latest issued consultation paper requires binary options brokerages who run their own call centers to abide by a strict set of rules, including employees not being allowed to provide traders with financial advice, forbidding aggressive marketing tactics, such as frequent phone calls, assertive convincing and applying pressure on customers, the use of real names in customer service, and possibly the most impacting of all regulatory guidelines, CySEC now requires that customer support call centers be located within an EU member state.
In an attempt to achieve greater transparency, CySEC is also calling on all brokers to be more diligent in their monitoring of the accuracy of execution on all orders and is suggesting that liquidity providers be regulated within the EU, requiring that LPs without EU regulation have a 10% capital ratio.
Following this tendency of stricter regulation and increased competition, we, at Leverate, are seeing a growing number of binary options brokerages looking at our solutions as a way of taking their already established businesses and shifting them onto Forex in order to hedge their future, in an industry that seems to be under more and more regulatory scrutiny, with fear of its days in the European market being numbered.
Some of these brokers are already licensed and look at Leverate for technology, while others are looking at our LXLite for an all-in-one solution including instant regulation.
