When it comes to the selection of a binary options broker, regulation is always first on many traders’ list of requirements. While I do not dispute that regulation is an important aspect when it comes to selecting a broker, it is not entirely a necessity. There are some regulated brokers that lag behind in terms of services when compared to some of the unregulated brokers.
However, unregulated binary options brokers also lack a lot in terms of guarantees as there is no backing by a financial regulatory body. As such it is pretty easy for them to scam their traders and get away with it.
Nonetheless, some of these brokers are actually among the best in the industry especially in terms of security, assets offered, trading experience and educational materials.
Why regulation is important
In order to discuss this part well, I am going to use the example of Cyprus Securities and Exchange Commission, “CySEC”. This body is tasked with regulating binary option trading activity in Cyprus and the EU, and to do this, it simply ensures the implementation of the following policies/rules.
- Police the binary options market within the Eurozone.
- Evaluate and control of all binary options brokers and services, in order to prevent heinous activities money laundering and fraud, among other atrocities.
- Validation of all the data delivered to the general public by binary options brokers including financial reporting, adverts, and promotional material among others.
- Verify that all the financial dealing s executed by binary options brokers is authentic and fully transparent.
- Protect trader funds deposited by investors with the binary options brokers from unfortunate situations such as bankruptcy and other related financial mishaps.
The first point is basically what gives binary options brokers regulated by CySEC the license to transact business within the entirety of the EU. The second point is quite clear as it points to the possible malicious activities that binary options brokers and other players may be tempted into if unregulated. Regulation ensures that these players are kept in check to avoid such activities with possible penalties when breached.
The other thing is making sure that information sent to the public is timely, accurate and complete. All promotional materials and financial reporting data must be validated by the regulatory body before any information is sent to the public. In addition, this regulator also ensures that traders are not fed the wrong trading information in terms of stock prices, exchange rates etc, and thereby avoiding manipulation of such data.
The final and most important part deals with separation of client funds from the broker’s operations, and this ensures security of funds in the unfortunate event that a broker becomes insolvent.
So how can you trust unregulated binary options broker?
From my experience, not all unregulated binary options brokers are dangerous. Some are actually in the process of securing regulation and thus wouldn’t want to risk being denied the license because of engaging in an irregular trading activity.
For instance, WMOption is one of the yet to be regulated binary options brokers in the market, after launching in 2015. It is a new player and will probably gain regulation down the line because it is not an easy process.
However, the broker is one of the best in terms of trading education and runs on the world leading binary options trading platform TechFinancials. It is good to note that TechFinancials is actually regulated by CySEC, FFAJ & JFSA(Japan) and CFTC (US), which makes it a secure platform to use for trading.
This clears any doubts about exchange rate, share price and index rate manipulations. WMOption also offers security of funds for clients by keeping client funds in segregated accounts.
In addition to this, prospective traders can also check out WMOption social page on Facebook or Twitter to establish whether it has been linked with any scam reports to date. By doing this they also get an opportunity to learn more about the broker.
Therefore, there are a number of ways of determining whether or not you can trust a binary options broker. Regulation is one of them, but as long as various key areas of the broker are under regulation, like in this case the trading platform, then there is nothing much to fear.
Wrapping it up
The bottom line is that some traders find it hard to pick a broker that is not currently regulated. However, as discussed here, not all unregulated brokers are rogue, and in fact, some of them are in the process of securing regulation.
However, if you come across a broker that has been in operation for several years, and still has no regulation, then you may need to look elsewhere.
