The Central Bank of Russia (CBR) intends to come up with a stance on the regulation of binary options trading in the country, according to an action plan of the bank for the financial markets in 2016-2018 published on Thursday. The central bank plans to “prepare proposals related to determining the Bank of Russia’s position on binary option trading” by the end of 2017.
The move is part of the CBR’s strategy for “improving mechanisms for countering bad faith actions of professional securities market participants.”
The action plan did not hint what the proposals could be. The CBR is in charge of the supervision of the Russian forex market, which until recently was not regulated. As of 1 January this year, however, Russia-based forex brokers are required to obtain a license from the central bank in order to operate in the country. Foreign brokers, on the other hand, are still allowed to target local citizens without any significant restrictions and most market participant continue to do business in the country through their foreign units. So far, there are just four Russia-licensed forex brokers.
In the recent weeks, binary option regulation has been a headliner in the industry news. In Europe most reputable authority bodies have expressed intentions to restrict this kind of trading. France and the Netherlands are in the process of developing bills that would prohibit the advertisement of risky instruments, which includes binary options. Germany is also considering the possibility, but has not made any steps as of now.
Meanwhile, Belgium banned from 18 August the distribution via online channels of over-the-counter (OTC) binary options, spot forex, and CFDs with leverage. Israel banned trading in binary options earlier in 2016, comparing them to gambling.
In most jurisdictions, binary options are regulated, in others they are not lawfully allowed, while in third they are not forbiden, but neither are there any authorized brokers that offer them. In the US trading in such instruments is restricted to on-exchange only (via Nadex or Cantor Exchanges), and in Canada it is not forbiden, but no brokers are authorized to provide binary options.
In the UK and Cyprus, the country of choice for most brokers licensed in Europe, binary options are regulated by the Gambling Commission and the Cyprus Securities and Exchange Commission (CySEC), respectively.
Binary options are a very controversial trading instrument. They are the closest thing to gambling in the online trading world. Investors guess whether the price of a certain instrument, would go upwards or downwards within a pre-determined time frame. Once the time is up, the option is deemed expired and the bet is settled. Depending on the outcome, a trader either collects a profit, or loses money.