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Malta Begins To Regulate Binary Options as Financial Instruments

Earlier today the Malta Financial Services Authority (MFSA) has announced that it will be taking over the regulation of binary option trading in the country, this way adding strength to the trend of binary options being treated like financial rather than gambling instruments.
 
Up until this moment, another Maltese regulator – the Lotteries and Gaming Authority (LGA), has been responsible for the oversight of binary options. The question of whether binary options should be considered a financial instrument or a form of gambling has been bugging both the e-gaming and trading industries for a while now, however the latter seems to be gradually winning.
 
The final deal between the Maltese regulators will allow Malta to join the still small number of countries, where financial authorities regulate the binary options sector, such as Cyprus, where it is up to the Cyprus Securities and Exchange Commission (CySEC) to oversee the operations of binary brokers. Japan's Financial Services Authority is also in the process of gaining regulatory power over this binary options and rumor has it that 60-second binary options will be banned there as they are nothing more than gambling.
 
Businesses have obviously started to make the transition from treating binary options as kind of betting to considering them as financial market instruments. The process began in 2008 when the North American Derivatives Exchange (NADEX) added binary options to its menu of financial instruments. More recently, binary options have staged massive invasion of the forex world: binary options provider O-Systems has integrated a social trading service with its platform, and software developer MarketsPulse has launched a solution for integrating automated trading platform Metatrader 4 and binary options. Even the gambling giant Playtech has made a move into binary options by releasing a demo version of its binary trading platform last month.
 
One bonus of the situation where gambling bodies regulate the binary option trading is that there is some easing of the tax burden for business. On the other hand, strict grip on the sector by financial regulators allows for a much, much better investor protection. 
 
The planned arrangement between MFSA and LGA stipulates that every company that would like to operate with binary options in Malta will have to set up physical premises in the country. In addition, all companies that have been licensed by the LGA will have to pass through a license application procedure with the financial regulator (the licensing process lasts from six to twelve weeks, which is reasonable). Another requirement for binary options brokers will be to be well capitalized – e.g. every broker should have a minimum net capital of EUR 730,000 (around $950,000). Start saving money, dear Maltese brokers! 
 
The joke aside, this may lead to smaller brokers getting kicked out of the market, leaving less in number but more reliable providers and this is good news for traders as they will not have to deal with unregulated brokers any more.
TAGS: malta  binary options  forex trading  malta financial services authority  gambling  bets  brokers 

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