The Cyprus Securities and Exchange Commission (CySEC) released on Thursday a circular which tightens the requirements for the binary options brokers regulated by it. Probably coincidentally, also on Thursday, the ombudsman of France’s financial regulator AMF released a report on the increasing number of complaints against Cyprus-regulated forex and binary options brokers.
The Cyprus document, signed by Demetra Kalogerou, chair of CySEC, introduces additional rules aiming to increase the transparency of the information on the traded underlying assets. The first new requirement is regarding the identification of the asset and the trading venue.
Among the other requirements, which could possibly increase transparency and have a more significant impact, is the introduction of a continuous presentation of the bid/ask prices of the underlying asset throughout the lifetime of the asset. Furthermore, the bid/ask prices of the underlying asset of binary option must be displayed clearly and prominently on the trading platform. The broker must also explain the strike price and how it was calculated, as well as who is the provider of the information.
CySEC also requires that the graphs presented on the trading platforms are accurate, clear and understandable to the average investor as to the describing illustrations.
The CySEC-regulated binary options brokers must also provide their clients with an option to cancel their transaction in binary options within a reasonable time after its execution, but no less than three seconds after the purchase of the binary option.
The new requirements do not apply to the 30-seconds binary options. The brokers have three months from the publication date (April 14, 2016) of the circular to implement the new requirements.
Meanwhile, several hours after CySEC released the new directives, Marielle Cohen-Branche, the ombudsman of the French financial regulator AMF published an annual report, highlighting the rising number of complaints against forex and binary options brokers, the majority of them regulated in Cyprus.
According to the document, in 2015 the total number of complaints against forex and binary options brokers was 228. It has increased 62% from 2014 and fivefold in the past five years. The AMF Ombudsman’s report revealed that 85% of the complaints in 2015 were against CySEC-regulated forex and binary options brokers.
Earlier this month, the French regulator AMF held a press conference and published a document on the “alarming scale” of “fraudulent credit and investment offers”, which bring “ruinous losses” for individuals. The regulator revealed the results of a survey among 14 799 active clients of the main brokers authorized by serious regulators, which found that highly-speculative trading was dangerous and could bring staggering financial losses. The total losses of those surveyed reached EUR 175 million between 2009 and 2012. Over the same period they gained only EUR 13 million. Ninety percent of the investors made losses.
At the same time, according to the Paris public prosecutor’s office, estimated losses on illegal Forex/binary option websites and scams through false transfer orders amounted to EUR4.5 billion in France over six years.
The AMF has listed forex, binary options, unusual assets and false savings accounts as illusion of easy money, singling out binary options as a particularly serious problem. Highly-speculative trading is the most widespread and worrying example”, notes the AMF. “Numerous adverts, displayed on sites with high audiences and targeting the largest number of people possible, flaunt unrealistic promises about gains to be made: companies operating with very dubious, or even illegal, practices are behind these commercial approaches.”
According to the AMF and France’s banking and insurance companies regulator ACPR, between 2010 and 2015, the number of unauthorized sites operating brokering and other types of financial scams has risen from 4 in 2010 to 360 in 2015. Last year alone the AMF received 1656 claims, while in 2010 they were 64.
At the same time, the Canadian provincial financial regulators have informed the public that in the country there are no regulated binary options brokers, and continuously issue warnings against unregulated binary options brokers scamming people out of their savings. In the US, where regulations are tight, is allowed trading only in exchange-traded binary options, the Commodity Futures Trading Commission (CFTC) is keeping an every watchful eye, charges with fraud unregulated binary options brokers and collects millions in penalties from others.