November 10, 2015 at 7:10 pm
There seems to be a huge uncertainty amongst traders when it comes to Binary Options and the USA. Nobody actually knows whether Binary Options trading is legal in the USA or not. Hopefully after reading this article you will have a better understanding of why it is such a complicated issue for US traders.
It all started back in 2008 when the USA had their financial crisis. This crisis had a huge impact on financial markets and the regulations surrounding them. Since then financial markets have become very restrictive, especially regarding Binary Options. Let’s first take a look at what influences Binary Options in the United States.
The US financial trading market is regulated by the Commodity Futures Trading Commission (CFTC), along with the Securities and Exchange Commission (SEC). Both these organizations supervise the US financial markets, which includes Binary Options. The regulation of Binary Options has become stricter the last couple of years to protect customers by preventing any illegal offshore brokers from doing business with US residents. The CFTC and SEC have put strict trading rules in place that they expect both traders and brokers to respect. Their goal is to enhance the financial market’s strength and reliability for both traders and brokers alike.
Many say that the laws in the USA surrounding Binary Options are restrictive and unfriendly towards offshore brokers. The US financial industry is tightly protected. Many foreign companies meet the criteria for US regulations, but up till now no Binary Options license has been awarded to any offshore broker. Regulatory authorities have only granted licenses to a few US brokers. Should a company receive a Binary Options license, they must respect and ensure the safety and security of traders. Should they fail to follow the rules and regulations, it can lead to enormous fines, loss of their trading license, and even incarceration for serious offenses.
US traders have two options when choosing a Binary Options broker. The first option is joining an offshore broker. Investors still have the ability to register with a broker of their choice, although this is highly discouraged by the CFTC and SEC. It is important to note that the United States regulatory authorities prohibit offshore brokers from soliciting US residents to trade with them. Traders who wish to sign up with these brokers do so at their own risk. No foreign broker can obtain a license from the US regulatory agencies. If you come across a broker that says otherwise, they are more than likely fraudulent. Instead, traders should look for brokers that are registered with CySEC or the FCA.
The second option US traders can take is to choose a broker that is registered within the United States. You will need to trade with an exchange-backed broker such as NADEX or with a broker that offers Binary Options on Exchange-traded funds (ETF’s) which are listed on the Chicago Board Options Exchange (CBOE) and AMEX.
This is the question that everyone wants to know, right? The simple answer is, YES! US residents are allowed to trade Binary Options, only if the broker allows it. However, there is an illegal aspect regarding Binary Options and the US, and that is offshore brokers are not permitted to solicit US investors to join them.
I have taken the liberty to make a list of brokers from our review section that still accept US traders to join them: (brokers list subject to change)
Last updated – 11/10/2015
You might be wondering why other brokers are not also accepting US traders. There are various reasons why a broker would not accept US customers. Any broker that uses the Spotoption platform is not allowed to deal with US clients. This has caused a lot of brokers to pull out of the US market since most brokers use the Spotoption platform. Some brokers simply prefer to stay away from the US due to their complex regulations pertaining Binary Options, while others refuse to comply with some of their regulations.
The US Binary Options market is closely monitored by regulatory agencies that make it very safe, but it is also making it tough for legitimate and high-quality brokers to enter the market. Experts believe that the strict regulations will only be expanded on, and it is highly unlikely that the US will ever allow off-exchange Binary Options. This means that the financial market will be dominated by just a few major players. If this happens, it will result in less competition and will inevitably lead to poor service and less industry improvement. It will be interesting to see which direction the CFTC and the SEC choose to go and what impact it will have on the future of Binary Options as the popularity of the industry grows.
November 19, 2015 at 5:49 pm
Being a US resident, I can tell you these new regulations suck. I can’t find any good broker to trade with, especially since Spotoption has also decided to stop accepting US clients. It has been such a hassle since these rules and regulations have been put in place. I know I should probably just move to Nadex but I prefer the simplicity of the offshore brokers a whole lot more. I think if the CFTC grants licenses to any options broker it would probably be more or less the same as Nadex. I reckon only time will tell. In the meantime I will take my chances with unregulated offshore brokers and maybe set up a Nadex demo account and see how it goes.
January 6, 2016 at 6:18 pm
I am not from the US but I don’t see binary options brokers getting regulated by the CFTC anytime soon, if ever. Even when we look at other trading opportunities such as Spot Forex, US citizens are limited to a 50:1/100:1 Leverage. I think it is complete BS! I really feel for you guys.
Like the previous OP mentioned – NADEX. It is not “Binary Options”! Try it out and you will see the difference. It might be US regulated, safer, more secure etc. but not something I enjoy trading.
I know there is still a small handful of brokers taking US clients but for how long? This will also have a great impact on related websites and brokers of course as US clients made up the majority of their traffic and income.
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