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Malta Introduces Regulation Over Binary Options Trading

Jul 22 2013

One more country has joined the troops of the small but growing army of regions regulating binary options: the Maltese Financial Services Authority (MFSA) has now categorized binaries as financial instruments and has taken over their regulation.  

Cyprus was the very first country to point a spotlight to the grey area that is binary options regulation: back in May 2012 the Cyprus Securities and Exchange Commission (CySEC) classified binary options trading as a financial instrument, and began requiring binary brokers to obtain a license before marketing their services. 
Then there was Japan, where reforms began in November last year to be finalized just now, drawing the line between financial instrument trading and pure gambling by setting clear rules which binary options must obey in order to be legal.  
In the meantime, Malta began working in the same direction and in March 2013 binary options oversight was taken away from the Maltese Lotteries and Gaming Authority and assigned to the MFSA but back then things were still a bit misty. Last week this transition was finalized and the MFSA has made a statement for the media, explaining that binary options on the island now fall under the jurisdiction of the European Union's Markets in Financial Instruments Directive (MiFID), a document that gives clear outlines on all financial instruments trading and companies providing such services. 
“In the light of this interpretation and after taking into consideration the manner in which binary options are classified and regulated in other EU Member States, the Malta Financial Services Authority wishes to advise that binary options are considered to be instruments falling within the parameters of the Second Schedule of the Investment Services Act (Cap. 370) which is itself modeled on MiFID,” the announcement read. 
As a result of that, any company that wishes to offer binary options trading to investors must get licensed under the Investment Services Act in Malta – one of the major legislative documents administered by the MFSA, and outlines the statutory basis for the licensing and regulation of financial services providers. 
In order to be granted such a license, a binary broker must comply with the three fundamental requirements of the Investment Services Act, namely: 
- to ensure the protection of investors and the general public;
- to guard the reputation of Malta taking into account Malta’s international commitments;
- to promote competition and choice.
In addition to that, a net capital of €730,000 (appr. $960,000) will be required from brokers to add one more layer of investor protection and make sure brokers can meet their obligations to the clients. 
Binary options have been struggling to overcome the negative image of a form of gambling for a while now, and many countries like the Italy for example still ban them in one form or another. Other areas such as the USA technically allow binary options trading but under conditions that are literally impossible to meet, hence blocking this activity unofficially. 
With more and more countries regulating binary options, however, this may soon change, and binary options may claim their spot next to stock or forex trading. 


TAGS: binary options  binary options trading  binary options regulation  binary options in Malta  Maltese Financial Services Authority  MFSA  CySEC 

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