What is a Regulated Broker?

Binary options trades are always processed through a broker. The brokers have offices or websites from which they operate to provide the investors and traders with the services.  The broker plays the most important part in a deal being successful. If the broker is a fraud, the investor has a risk of losing a part or all of the invested capital.

To eliminate the cases of fraud in binary trade, which had become very often in the recent past, different governmental agencies have started regulating the brokers. A regulated broker is the one who is registered with the local and federal government as a binary options broker. They have proper licenses issued to them by the government. However, it must be kept in mind that even if the broker is regulated, the government or the licensing authority cannot be held responsible for any type of financial or other loss in the deal between the broker and an investor.

In Europe, the traders are verified and regulated by the financial authorities recognized by MiFID. It means that the traders registered by the FCA in the UK are accepted as authorized financial service providers by BaFIN in Germany and AMF in France.

So, in the EU region, if a broker is registered with the financial regulatory authorities of one country, they can operate in the whole Europe. Cyprus Securities and Exchange Commission is one of the most accepted regulators of the brokers in the Cyprus and the brokers registered with them can operate legally in the whole EU. Forbes has a good article about this here.

Why Regulated Brokers?

A Binary options trader is advised to always go for a regulated Binary options broker to have a trade. The two biggest benefits of choosing a regulated broker are

  • They ought to be honest because they are monitored and audited by authorities. They won’t mingle your funds with the firms.

  • They let you withdraw the funds from your account with no restrictions

  • Regulated brokers also usually have a better reputation in the market. Your money is safer with them than it is with the unlicensed ones. Even if a regulated broker is bankrupt, the traders’ funds are usually protected by the investors’ funds.


In Europe, the traders are verified and regulated by the financial authorities recognized by MiFID. It means that the traders registered by the FCA in the UK are accepted as authorized financial service providers by BaFIN in Germany and AMF in France. Trusted Binary Reviews is one of the leading websites in broker and trading software reviews.

So, in the EU region, if a broker is registered with the financial regulatory authorities of one country, they can operate in the whole Europe. Cyprus Securities and Exchange Commission is one of the most accepted regulators of the brokers in the Cyprus and the brokers registered with them can operate legally in the whole EU.

 

 

Alert!

Some not-so-honest brokers include some deceptive lines in their advertisements which tend to express that the broker in question is a regulated one but as a matter of fact, they seldom are. One of the most popular lines is

“Binary options, the simplest way to make easy money are now being regulated by CySEC!”

It does not mean that they are regulated by CySEC but just tell you that the binary options are now being regulated. You cannot do anything about them in any court of law because they never claimed to have a license. To avoid people and firms like these just ask them for their 5 digits registration key and check for it on the CySEC’s website to verify if they have acquired a license and if the license is still valid.

Sometimes, asking only for a valid license and even having verified it may not be enough to trust a broker. On the website of FCA, the following directions are provided for the trader to fully ensure the reliability of a broker.

  • If you plan to do business with a brokerage firm, and its clearing firm are members of Securities Investor Protection Corporation (SIPC)

  • Try to get to know the people you are dealing with and try to judge their credibility by asking some simple questions like


o    Where did you go to school?

o    What is your employment history?

o    What is the scope of your experience?

o    Have you dealt with cases like mine in the past?

o    What licenses do you hold?

o    Has your license ever been suspended? If yes, why?

o    Do you provide any type of insurance on the investments/trades?

o    What if you go bankrupt?

o    Have you ever been sued by a client for any reason?

These are just some of the tips to help you invest in the safe hands. Always invest after you are totally sure that the firm, person or agency you are trusting with your hard earned money is really trustworthy enough because there are a number of fraudulent people in the field.