Invariably all the binary option brokers who claim to be regulated under the European Union’s financial regulatory framework will have their office in either Cyprus or Malta. Cyprus became the member of the EU in 2004.
Till then, it was considered a tax haven for companies.
Enterprises were eager to establish a base in Cyprus because of its close proximity to the mainland Europe. However, everything changed once Cyprus joined the EU.
A firm engaged in providing financial services can legally have access to the clients in Europe only when it is regulated as per the EU law named MiFID (Markets in Financial Instruments Directive).
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Thus, in order to avoid losing the companies which have already established base in Cyprus, the CySec (Cyprus Securities and Exchange Commission) implemented the MiFID regulation as soon as the country joined the EU. MiFID ensures that regulation of investment services across the 31 member states of the European Economic Area is conducted in a harmonious manner.
Three years before Cyprus joined the EU, the CySec was established as a public corporate body. In May 2012, CySec became the first regulator to officially announce binary options as financial instruments. Thus, it became a necessity for all the binary option brokers to register with the CySec.
The CySec is also responsible to issue licenses to all kinds of investment firms, including the binary option brokers. Furthermore, the organization has powers at its disposal to take disciplinary actions against brokers who do not comply with the rules.
Thus, a trader dealing with a Cyprus based broker can be rest assured that he is protected by the same law that governs the companies offering financial services in the mainland Europe.
The CySec is an extremely transparent regulatory body administered by a five-member board. Additionally, the Governor of the Central Bank of Cyprus is represented by a non-voting member. By visiting the website of CySec, a beginner can verify the credentials of a binary broker. Usually, a binary broker regulated by CySec will have a five-digit registration number with a back-slash in between. CySec continues to monitor all the binary brokers and issued warnings, if any, are displayed on the official website.
In 2014, there was intense criticism on the functioning of CySec. A majority of market participants blamed CySec for the manner in which binary brokers took the clients for a ride. Very soon, the organization molded itself and started monitoring the brokers in an efficient manner. The organization took strict measures which included the slapping of fines and revocation of license. Such actions have increased the credibility of CySec in the recent past.
Another jurisdiction which complies with the MiFID law is Malta. This island nation is emerging as another region providing finance related services to the residents of the EU. Malta has also given the status of financial instruments to binary options and a binary broker should get a category 3 investment services license to do business from that region.
So, a beginner who is interested in opening a trading account with a binary broker complying with the EU regulations can look at the list below, choose the broker, visit the website, study the features, and finally sign up with confidence.