The Future of Binary Options Brokers
One thing about binary options brokers is that their future is inevitably tied to the instrument that they offer. The better the instrument, the greater the potential and vice versa. However, as good as binary options are, they are far from perfect. Unless these imperfections are mitigated or removed, the future of the entire industry may not be as bright as we once thought.
Right now, binary options do not exactly enjoy a stellar reputation on the market. Sure, the industry is nowhere near as bad as it once was, but the sheer number of bad apples is making the whole bag stink. Not too long ago, Belgium banned binary options altogether, complete with forex and CFDs . And unlike forex brokers that could easily incorporate binaries into their offer to increase their earnings (link to #4), for a binary options broker to make the transition and switch to forex, commodities etc. is almost unheard of. Even if it were possible, how many would be able to make the transition?
This is why their path is set, but it does not mean their future is predetermined by default. There are plenty of things that can be done to make the binary options finally cross into the mainstream for good. keep in mind that there is absolutely nothing wrong with binary options as such; the entirety of the bad rep that they have comes from numerous unscrupulous traders and their aggressive practices that are slowly ruining the entire industry.
Binary options are still being regulated, but these efforts are hindered by short-sided brokers and poor advertizing campaigns. These were instrumental in getting Belgian FSMA to shut them all down for good, including binary options brokers that haven’t done anything wrong. And the fact that binary options involve a significant amount of risk – albeit at limited exposure – certainly has not improved the public opinion on the matter. In fact, they have been almost as damaging as brokers who promised several thousand dollars a day, which essentially drops binary options to the level of a get rich quick scheme.
Aside from that, it only takes a few unscrupulous “account managers” who take it upon themselves to place bets on behalf of their clients or those that simply refuse to allow their clients to make a withdrawal, citing some obscure rule or outright lying to their clients’ faces. But all these bad seeds are slowly being rooted out.
CySec to the rescue
CySec is one of numerous regulators that have taken it upon themselves to regulate a particularly difficult industry. In fact, CySec is the regulator of choice for the majority of binary options brokers, and as such they have the leading role in determining not only the future of said brokers, but the future of this entire industry. Recently, they have clamped down on a number of brokerages, including Falcon Brokers and more recently ACFX for various transgressions and discrepancies.
Under all of this, there is a series of demands on the behalf of regulators towards brokerages that need to be met, or there will be punitive measures. And this approach is definitely yielding results. Now, even other bodies all across Europe have taken an interest in this industry and seek to regulate it as well as bring it out of obscurity and into the light.
The Broker of the Future
As time goes by, small binary options brokers are expected to either grow or close shop. Only the strongest and fittest will survive. In fact, there is already a trend of CFD and possibly other brokers slowly making a transition into this field, while retaining the bulk of their business. For instance, IG and CMC have already made the arrangements, and others are sure to follow in the near future.
The more regulated brokers start offering binaries as well, the safer the industry becomes. This is because even though binary options are technically in the “gray area,” regulated brokers who already deal in forex and other fields have to apply the same dose of regulation to all of their business ventures, less they lose credibility and may even face fines from their respective regulatory bodies.
Finally, there is the proposed MiFID II, that will replace the existing set of rules and regulations on the European financial sector, which is also rumored to involve rules on binary options. All in all, this means more products, safer dealings and lots of other improvements. So, the future is bright for binary options themselves as well as people who trade them. Whether brokers survive and prosper or not is entirely up to them.