UKGC and its role in regulating binary options
From January 3, 2018, the responsibility for regulating binary options providers in the UK will shift from the UK Gambling Commission to the Financial Conduct Authority. Unlike UKGC, which is a government agency, FCA is independent of the UK government and instead gets its funding from fees that it demands from the members of the financial services sector. Since 2015, when UKGC was established, it has been responsible for regulating binary options. Binary options are a form of a bet, where a person either wins money or loses it. There are only two possible outcomes, hence the name ‘binary’. Even though it is a form of gambling, and other forms of gambling are regulated by UKGC, it is not surprising that the burden to oversee binary options providers shifted to FCA. The size of binary options trading has increased in the past years, and FCA is more fit to regulate these activities. Under FCA, binary options will be regulated similarly to investment options.
UKGC takes a great care warning people about the dangers of unlicensed providers. “There is a risk that arrangements which resemble binary options betting or other financial investments could be scams,” – reads the organization’s website, before listing signs that could alert users about possible fraudulent schemes. One of these signs is a too-good-to-be-true product, where providers offer unrealistic returns. UKGC also warns about cold-calling, saying: “if you have not requested contact you should not give them any personal information. Do not agree to any deals immediately and insist on time to obtain independent/legal advice before making a decision”.
It is also the case when some of the people are aware that the providers they are dealing with are unlicensed and operate illegally but still choose to continue using their services. UKGC’s website also warns against such cases. “An unlicensed company may be acting illegally. They will not be required to abide by any code of conduct and there is no incentive for them to deal fairly with you. It is easier for unlicensed companies to use false names, addresses and contact numbers and to disappear with your money. Also keep in mind that, just because a business is registered with Companies House, this does not necessarily mean the business itself is operating legally,” – reads the website.
It is interesting to see how the change will affect the binary options market. One thing is clear, from now on, binary options providers will be licensed and supervised by the Financial Conduct Authority.