New Zealand opens consultation on binary options licenses

Maria Nikolova

New Zealand’s FMA notes high volume of complaints about online FX and binary options over the last 18 months.

In mid-February this year, FinanceFeeds reported that New Zealand’s Financial Markets Authority (FMA) was monitoring binary options while taking its time to consider future action. Today, the regulator provided an update regarding this action – it is proposing binary options providers targeting New Zealand residents to be obliged to obtain licenses.

The proposals concerning binary options form part of a consultation on short duration derivatives.

Until recently, the regulator’s interpretation of the definition of “derivative” in section 8 of the FMC Act was that any derivative transaction that is settled within three working days (for FX agreements) or one working day (for all other cases) was not regulated. Hence, thus far, a derivative issuer license was not required for that activity.

However, due to concerns about the potential harm these products pose for investors, the FMA has changed its stance and now defends the view that businesses selling these products should be licensed.

The New Zealand regulator stresses that during the last 18 months, the volume of complaints about online FX and other short duration trading services like binary options has remained at about 40% of the total volume of complaints it has received. The FMA has also seen the increased emergence of online trading platforms, often based in overseas jurisdictions, targeting New Zealand investors with offers of short duration derivative products.

Due to these developing risks, the FMA is reviewing the definition of “derivative” in the FMC Act, looking at whether providers of these products must be licensed as derivatives issuers. The regulator is concerned that deliverable spot FX contracts might be caught by the definition of derivative.

As a result of the revised view, entities making regulated offers of short duration derivatives will need to get a derivatives issuer licence and comply with the relevant FMC Act obligations. Providers who already have a licence will have to review their existing PDS and business practices. Providers of such products will have to consider whether they need to register on the Financial Service Providers Register, or amend their registration.

The FMA will provide a grace period. It expects all currently unlicensed providers to apply for a licence by August 1, 2017. All providers must hold a licence and be fully compliant by December 1, 2017.

The consultation closes on April 28, 2017.

In Canada, the Investment Industry Association of Canada (IIAC) has proposed a similar approach to tackling binary options fraud. The Association is proposing to allow brokerage firms regulated by the Investment Industry Regulatory Organization of Canada (IIROC) to be registered to offer binary options to investors. The outcome of such measures is far from clear, given that it has not led to any apparent positive results in jurisdictions like France, where only regulated binary options brokers are allowed to target investors. The blacklist of unregulated binary options brokers there has grown exponentially over the past couple of years and fraud is still flourishing.

Read this next

Metaverse Gaming NFT

DCentral Miami brings together all of Web3, NFT, DeFi, Metaverse

The world’s biggest Web3 meeting entitled DCENTRAL Miami is set to take place November 28-29, featuring a lineup of some of the biggest and most influential names in the blockchain space.

Digital Assets

Crypto ban expands across UK banks as Starling joins ‎crackdown

UK digital bank Starling has banned ‎all customer payments related to cryptocurrencies, another blow for the crypto traders ‎who recently saw a sizable number of banks deciding not to ‎finance the wobbly asset class.‎

Interviews

Markets Direct at FIA EXPO 2022: Traders know what they want from brokers

The FIA Expo 2022, one of the most prestigious events within the global derivatives trading industry, took place in Chicago on 14 & 15 November.

Interviews

FIA Expo 2022: TNS addresses public cloud limitations with hybrid infrastructure

November is the month of the FIA Expo, one of the largest futures and options conferences in the world, bringing together regulators, exchanges, software vendors, and brokers in one place: the Sheraton Grand Chicago Riverwalk. 

Retail FX

Italy’s regulator blacks out Finance CapitalFX, MFCapitalFX

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

Suspected leader of Honk Kong ramp-and-dump scam appears in court

A leader of a sophisticated ramp-and-dump scheme made his first court appearance in a Hong Kong court today, charged with market manipulation and various criminal offences. The case stems from an earlier joint operation of Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), and the local police. 

Institutional FX

Cboe’s James Arrante discusses growing demand for fixed income, FX algo

We caught up with James Arrante, senior director of FX & US treasuries product and business management at Cboe Global Markets, to uncover emerging trends in the FX and fixed income markets and learn more about the bourse operator’s recent initiatives.

Retail FX

Eurotrader acquires UK broker Petra Asset Management

Eurotrader Group has formally entered into the UK market with the acquisition of FCA-regulated broker, previously named Petra Asset Management Ltd. The new entity operates under the brand name Eurotrade Capital Ltd.

Inside View, Retail FX

The Game of Chess Continues – OPEC, China and the Oil Market

Over the past decade, the US has been complaining about the amount of power which the BRIC group, and specifically China, has on the global economy. BRIC stands for Brazil, Russia, India and China; these were the world’s fastest growing economies. Only in the past 10 months, the US has turned their attention toward OPEC due to the prices of fuel. Nevertheless, China seems to have a strong influence even over the price of crude oil.

<