Fintech O-Systems turns to forex market on back of binary option regulatory limitations

Fintech O-Systems turns to forex market on back of binary option regulatory limitations


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O-Systems, a binary options platforms and software provider, intends to enter the forex market with automated trading solutions, the fintech said last week. The company is expanding its technology toward offering fully automated solutions to regulated forex brokerages.

The reason behind this decision are the ongoing and increasing attack against binary options on the part of the regulatory authorities across various regions worldwide. The company intends to invoke a model that includes an automated forex platform in which no sales or retention team will feature at all.

O-Systems has already onboarded its first regulated forex brokerage and is in active discussions with several other larger ones. However, the fintech did not disclose which broker has joined it.

Cyprus-based O-Systems offers binary options brokers a complete set of solutions to start operations, including a trading platform, a customized and branded web site, back office services, system hosting and maintenance, customer relationship and risk management, as well as leads and media, and marketing and affiliates systems. Now this fully-automated concept will be applied to the forex market.

The fintech is developing an automated webtrader solution for forex. It intends to focus its research and development (R&D) efferts toward the development of automated systems that are specific to the spot forex business.

According to the fintech, the revenue concept for binary options providers differs significantly from that which applies for forex brokers. The revenue model used by the majority of forex companies is in many cases negative. In addition, it is not effective as the level of customer retention is rather high for most forex brokers. The use of automated technology services, such as those provided by O-Systems is a great advantage when it comes to cutting costs. The fintech’s solutions offer an entirely automated process.

“Retail forex customers need to engage more with their broker, they are trading a spot transaction and rely on analytics, news, educational services and signals to make their decisions,” O-Systems CEO Haim Lagziel said.  “However they can do this once they are a customer, purely on a customer service basis rather than sales and retention, therefore brokers which understand this can reduce their costs and maximize their profits exponentially by using a fully automated system and not having to have the headache and cost of running a call center,” he added.

Are regulators trying to put an end to binary options trading

Earlier this year, several financial watchdogs, mainly in Europe, launched an attack against binary options. Belgium banned from 18 August the distribution via online channels of over-the-counter (OTC) binary options, spot forex, and CFDs with leverage. France also banned recently the online advertising of “highly speculative and risky financial contracts”, such as binary options, forex and CFDs with a leverage greater than 1:5. Meanwhile, the Netherlands has also announced that it considers ban on the advertising of such instruments, calling them “toxic investment products for consumers”.

Israel, which is not an EU member state, also imposed a ban on trading in binary option instruments in the country. Recently, the Israeli regulator also said it is to ban the advertising of binaries to retail clients abroad, which would put an end to major brokers will not be able to operate locally-based call centers.

Regulation also makes forex markets to suffer

Binary options are not the only type of financial tradable instruments that have been attracting regulatory attention in the recent months. Just this month, the Cyprus Securities and Exchange Commission (CySEC) and the Financial Conduct Authority (FCA), the two leading forex regulatory destinations in Europe, announced they are to alter the standards for key forex trading conditions.

Both authorities are setting a new leverage cap of 50:1 (25:1 for inexperienced traders with less than 12 months of trading under the UK framework). They are both banning bonuses or other benefits to promote risky trading instruments. While the new requirements set by the CySEC sounds rather recommendation, the UK watchdog uses a more compulsory tone. The changes were triggered by the recommendations and guidelines of the European Securities and Markets Authority (ESMA) from mid-October in regards to forex and binary options regulation.

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