While researching binary options brokers, you have probably noticed that some websites proudly proclaim that they are regulated by CySEC or another authority, while others do not.  If you are in the USA, you may also have become frustrated with these regulatory notices, since they often come from sites that will not allow you to trade.  What does it mean when a broker says they are regulated, and how does it affect you as a trader?

A regulated binary options broker is any broker that has a license to operate under a financial regulatory authority.  It is important to understand that this type of license is not the same thing as a generic business license granted in a country.  Sometimes companies will try to fool you by saying they are regulated, but all they have is a license to do business.  They are not meeting the stringent requirements set by their local financial authority, or they would have a financial license too.

Let’s take a look at the regulated brokers we recommend, and then we will talk about different financial authorities, and finally talk about the benefits and drawbacks of regulation, and what to do about it if you are a USA trader.

Trader Favorite Regulated Binary Options Brokers

  • 24option:  USA traders are not accepted.  Licensed and regulated by CySEC, license #207/13.  We love this broker and have been recommending them for a long time.  They provide a lot of excellent resources for traders, and on their platform, you can trade High/Low, One Touch, Boundary, and Short Term options.
  • MarketsWorld:  USA traders ARE accepted.  Licensed and regulated by the Isle of Man Gambling Supervision Commission (GSC).  License issued 6 April 2011.  This is a very exciting binary options broker which allows traders to invest as little as $1, and also includes a no-deposit demo account.  Both are rare features.
  • OptionFair:  USA traders are not allowed.  Licensed and regulated by CySEC, license #216/13.  On this binary options website, you can trade High/Low, Boundary, One Touch, and Short Term trades.  They have a lot of exciting benefits for their members, including their Elite Club.
  • Banc De Binary:  USA traders are not allowed.  Licensed and regulated by the Cyprus Securities and Exchange Commission (CySEC), under license #188/13.  Banc De Binary was among the first binary options brokers to get serious about regulation.  They not only are licensed by CySEC, but also work closely with financial authorities throughout Europe to serve their customers.  They have a huge compendium of resources available to traders, and are definitely among the best choices if you are not in America.

Regulatory Agencies – Legal Regulatory Bodies

Now that you know about some of our favorite regulated binary options brokers, let’s talk about these financial agencies more.

  • Cyprus Securities and Exchange Commission (CySEC):  This is the financial authority which regulates the majority of licensed binary options brokers.  Their licensing process is not as strict as that of other regulatory bodies in Europe.  As a result, it is easier to get through the process.  They do however operate under European Markets in Financial Instruments Directive (MiFID).  MiFID regulates financial services throughout Europe.  That means that getting listed with CySEC allows regulated brokers to provide services throughout the continent.
  • Isle of Man Gambling Supervision Commission (GSC):  CySEC is not the only game in town.  Since binary options has an element of speculation to it, it overlaps into the world of gambling.  For this reason, it is suitable for an agency like the GSC to regulate it.  The GSC may sound familiar to you if you have ever gambled online with the PokerStars casino.  The GSC regulates them too.

Other regulatory bodies you should know:

  • Malta Gaming Authority (MGA):  This is an independent regulatory body in Malta similar to the GSC discussed above.  You may run into some binary options brokers regulated by the MGA as well.
  • US Securities and Exchange Commission (SEC):  This is a regulatory body in the United States responsible for overseeing federal securities and stock and option exchanges. As BinarySites.com points out on their regulated page, one of the only USA based regulated binary options exchanges is NADEX. All these other ones are not regulated by any US regulatory agency.
  • US Commodity Futures Trading Commission (CFTC):  This USA regulatory body is in charge of options and futures markets.

While the SEC and CFTC do not regulate binary options brokers right now, they are important to know about, because they make it difficult for binary options brokers to offer services to USA traders.  As a result, most regulated brokers overseas also refuse to offer their services to traders in the US.  CySEC forbids it, because they want to get along with the CFTC and SEC and play it safe.

Why Trade With a Regulated Broker?

Regulatory bodies are concerned with looking out for the interests of consumers, which in this case includes you, the trader.  They set rules that their members must abide by after they are licensed.  These rules protect your interests.  They ensure that you get fair market prices, and that you can easily and quickly withdraw your winnings.  In essence, regulation imposes quality control and keeps brokers honest.

What Should You Do If You Are in the USA?

The main drawback of regulation is of course the fact that most regulated brokers avoid opening their doors to USA customers.  What do you do if you are trading in the US?  You have two main options.  The first is to look for a broker which is regulated and which does take USA customers.  MarketsWorld is a fabulous example. If you want one that is based in the USA then check out NADEX.

The second option is to trade with an unregulated broker.

While this may sound like a questionable idea at first, there are actually some great USA brokers we recommend.  These brokers are committed to keeping their doors open to customers everywhere while still providing a quality product.

Some good examples include CherryTrade, Porter Finance, and GOptions.  Wherever you are located, there is a quality binary options broker out there waiting for you.  See our recommended brokers list and read our detailed reviews to get started!