“Binary options allow a consumer to make a bet on the expected value or price of a stock, commodity, currency, index, or just about anything that is capable of being measured in financial terms,” – explains the Financial Conduct Authority. Up until 2018, these products were regulated by the UK Gambling Commission, if the company offering them also offered other forms of gambling. From January 3rd, 2018, all responsibility regarding the binary options will shift to the Financial Conduct Authority.
The main reason cited for the decision is the risk that is associated with binary options. These tools can lead to extremely heavy losses for the customers and can be used to defraud individuals as well. “A key risk of the product is the fact that they are typically priced in a similar manner to fixed odds bets since their value is determined by the probability of an event happening. Investors are offered higher returns for lower probability events and lower returns for higher probability events. For investors to make a profit from trading they need to ‘beat the odds’ on a regular basis, which a majority of investors do not,” – explained a statement from the FCA.
From now on, companies offering binary options will have to be authorized by the FCA
As reported by Nyecasino.casino, starting this year, the Financial Conduct Authority became the supervisor of the firms that offer binary options. Furthermore, these products will be treated by the regulators as investment products, following the established practice in the European Union countries. Customers who want to make complaints regarding certain providers will have to contact the Financial Ombudsman Service.
The move is triggered by the proliferation of scams associated with the binary options
In the first half of 2017 alone, reportedly about 700 people became the targets of binary options scams and lost over 18 million pounds in total. The initial response from the authorities was to raid 20 London offices. In a broader perspective, the control over the companies offering the binary options was moved from the UK Gambling Commission to the Financial Conduct Authority.
“UK consumers are being increasingly targeted by binary options investment scams, which commonly promise higher than average returns for bets that never occur and manipulate software to distort prices and payouts. They also commonly refuse to return client funds and break all contact with customers. Fraudulent binary option traders often advertise on social media – the advertisements link to websites that are well-designed and professional looking,” – warns the FCA.
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