New Zealand’s FMA monitors binary options but no action yet

Maria Nikolova

The regulator has spotted a rise in FX and binary options firms targeting New Zealand investors.

New Zealand’s Financial Markets Authority (FMA) has earlier today published an updated version of its Strategic Risk Outlook. The new version of the document, which outlines priorities for the regulator for 2017, concerns binary options too.

The FMA says that it has noticed rise in Forex and binary options trading providers targeting New Zealand investors to trade via their platforms. This is hardly surprising, we may note, given that as many jurisdictions are considering tougher regulations for binary options many companies are cutting and running and/or shifting to jurisdictions where regulations for binary options is either non-existent or loose. Obviously, New Zealand is an attractive destination for such businesses flourishing, since the FMA has spotted the trend.

In its Strategic Risk Outlook, the FMA underlines the risks associated with binary options, given that they often use leverage and investors are not fully aware of the chances of losing their money.

The New Zealand regulator admits that “In some cases, the businesses are just operating investment scams”.

Nevertheless, the watchdog takes a soft stance regarding binary options regulation, saying that “We will continue to monitor these types of products and how they are sold to better understand what future action we would take”. Apparently, the New Zealand regulator is opening the door for an infinite period of time for companies offering binary options.

Others, in the meantime, have acted more decisively. France has banned all sorts of advertising of high-risk financial products, including binary options, thanks to the Sapin 2 law. Quebec’s financial regulator is seeking to amend the Canadian province’s Derivatives Regulation in order to formally prohibit the offering of specific types of binary options to Quebec investors. Under the regulatory proposals, binary options with expiries of less than 30 days will be banned.

The latest jurisdiction to change the regulation of the binary options sector is Cyprus. A couple of days ago, CySEC published a Circular outlining proposed changes to requirements for providers of binary options trading registered in Cyprus. The new rules will see some binary options types become no longer acceptable – the tenor must be for a period of at least 5 minutes. The strike prices will have to be fixed for all digital contracts within a contract series, whereas firms will be required to store details of every calculated expiration value for a period of 5 years after calculation.

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