What Is CySEC Regulation All About?
Alex

LEVEL 10 : SENIOR

REVIEWS 9 | REPLIES 84

#2690

Alex

October 9, 2015 at 3:26 pm

Binary Options has generated a bad reputation over the years. This is mainly due to the fact that the industry was largely unregulated for many years, and some countries thought of Binary Options as gambling. This all changed when the industry finally got regulated in the last couple of years. I am sure that most of you have heard about CySEC Regulation but do you actually know what it is and what it means for Binary Options trading? Let’s have a look.

What is CySEC Regulation?

CySEC stands for Cyprus Securities and Exchange Commission. CySEC was initially launched in 2001 to regulate the Cyprus financial markets. In 2004, Cyprus became a member of the European Union. This caused CySEC to become a component of European MiFID regulation which gave firms that were registered in Cyprus, access to all European markets. This attracted a number of overseas companies to register in Cyprus so that they could capitalize on this regulatory regime. On May 4, 2012, CySEC announced that they officially recognized Binary Options as a financial instrument. The effect was that all the Binary Options brokers operating from Cyprus had to be regulated. The banking laws in Cyprus and the member status Cyprus has in the European Union, attracted many financial institutions including banking, Binary Options and Forex firms to move to Cyprus. I believe that the vast number of financial institutions operating out of Cyprus is what led them to regulate these companies.

Responsibilities of CySEC

  1. They have to supervise and control the transactions carried out in the Cyprus Stock Exchange, which includes the listed companies, brokers and brokerages.
  2. Supervise and control Collective Investment Schemes, Licensed Investment Services Companies, mutual fund management companies and investment consultants.
  3. Responsibility to grant operation licenses to investment consultants, brokers and brokerage firms.
  4. Impose sanctions and penalties to investment consultants, brokers, brokerage firms and any other who fall under the Stock Market legislation.

What Does CySEC Regulation Mean?

CySEC Regulation is a big deal for us, and for you, and here’s why. Let’s say you open an account with a CySEC regulated broker, such as Stockpair. The regulation means that every transaction on your account will be under supervision, including your deposits, the trades you make and your withdrawals. If you are trading with a regulated broker, they are forced to keep your money in a segregated account which cannot be used by the broker for their business needs. This means that whatever the case may be with the broker – your money will always be protected.

cysec-regulation

Aside from the reliability and legitimacy there are a few reasons why regulation is good for Binary Options brokers and traders:

  1. All the money is held in a trust account. If the broker does not have regulation, it is not permitted to deposit binary trading accounts into a trust fund. Unregulated brokers’ money is in danger of theft, fraud or poor business practices by the broker.
  2. Regulated brokers are forced to have a third party look over their operations. They do this to ensure fair play with all brokers. Unregulated brokers, on the other hand, are not required to have a third party look over their shoulders. This is the reason why they can get away with stuff that regulated brokers can’t.
  3. CySEC Regulated brokers must also allow governing bodies and the public to have a look inside their operations. This is another effective way to ensure that brokers play fair and also to protect the interests of traders.
  4. The rules set out by CySEC enforce a standardization of binary trading and available assets which regulated brokers may offer. Unregulated brokers can offer any assets or other types of binary trading options that more closely resembles gambling than market speculation. Standardized binary options also allow binary platforms like SpotOption to “make markets” for trading Binary Options.
  5. Brokers who are licensed by CySEC will fall under the European MiFID regulation. This means that these regulated brokers are allowed to operate in the 30 member countries of the European Economic Arena. This is very good for brokers, but even better for traders, because the brokers will have to adhere to all the relevant EU regulations.

You should know that once a broker is regulated, it doesn’t mean that it will have the license forever. Regulated brokers must meet certain criteria’s to become and remain licensed. If they fail to satisfy these criteria’s, they run the risk of strict penalties or worse lose their license.

Final Thoughts About CySEC Regulation

CySEC’s primary mission is to protect investors. Unregulated brokers are not necessarily inferior compared to regulated brokers in terms of their practices. A regulatory license will just add to the authenticity of the broker and guarantees the highest possible standards. Some of the EU countries are creating much tighter controls such as completely blocking website access to unregulated institutions. If you decide to trade with a regulated broker, you are safeguarding your ability to trade, access to your trading funds and fair treatment from the broker. My opinion – stick to the regulated ones! Here is a list of a few CySEC regulated brokers to choose from:

Eunice Wilson

LEVEL 1 : NEWBIE

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#2763

Oumi

October 19, 2015 at 3:05 pm

Damn I never actually realized that regulation played such a huge role when it comes to binary options brokers. After reading this post I’m certainly going to join a regulated broker and not mess around with other ones.

Leslie Barnett

LEVEL 1 : NEWBIE

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#2764

LeslieITM

October 19, 2015 at 10:20 pm

That is a wise idea my friend. I have had so much trouble with unregulated brokers in the past. Believe me, you don’t want to go down that road! Nothing beats trading with a regulated broker.

Fredrick Adams

LEVEL 1 : NEWBIE

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#2765

Freddy

October 20, 2015 at 6:34 am

Trading with a regulated broker does give you piece of mind. But as you can see there are quite a few aspects that brokers should address in order to get regulated. Some brokers that are not regulated could be in the process of getting their licence and could very well be a awesome broker. Don’t shoot a broker down simply because it is not regulated yet. However it would be a good idea to wait until the broker has its license before depositing real money with them. So in the mean time you can try out their platform if they offer a demo account and see if you like it.

Rudy Stewart

LEVEL 1 : NEWBIE

REVIEWS 0 | REPLIES 2

#2766

Rudeboy

October 20, 2015 at 2:40 pm

This is a great article. I never knew what it meant when a broker says they are regulated by Cysec. Well, now I know. I have checked through the list of regulated brokers but I can’t seem to choose one which I want to trade with. Can anybody tell me which one is good?

Lyle Wright

LEVEL 1 : NEWBIE

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#2767

Wrightside

October 20, 2015 at 11:50 pm

Hey Rudeboy.

Yes it can be very confusing to choose the right broker. It took me a while to find one which I like. At the moment I’m using Stockpair and I’m really satisfied with their trade execution, customer support, no spread, expiry times and good withdrawal times. There are a lot of pro traders that are also using them so that just gives me more confidence to trade with them.

Rudy Stewart

LEVEL 1 : NEWBIE

REVIEWS 0 | REPLIES 2

#2768

Rudeboy

October 21, 2015 at 8:23 am

Thanks for coming back to me Wrightside. I have done some research and couldn’t really find anything negative about them other than that they don’t accept US traders. It looks like I’m going to go ahead and give them a try.

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