Binary Options Regulation In Australia

asicLast time we looked at the Australian binary options industry, this week we take that further by looking into the regulation situation there. Many countries around the world are undecided in whether to classify binary options as a new form of investment activity or a gambling activity. Nevertheless, the Australian regulatory authorities have no problem in viewing binaries as a new addition to the list of financial products that are available in the financial market today. By classifying the trading of binaries a new type of investment activity, this put the provision of binary trading services under the purview of the (ASIC). In short, ASIC is the agency that is responsible for regulating binary options brokers in Australia.

Under the Australian Corporations Act 2001, corporate entities such as binary options brokers wishing to provide financial services to the public are required to obtain an Australian Financial Services Licence (AFSL) from ASIC. When deciding in whether to award an AFS license to a broker, ASIC will first consider if the broker:

  • Is competent to conduct the kind of financial services that the broker specified in its application
  • Has sufficient financial capacity to operate the business of providing binary trading services
  • And meet all the other legal obligations required under the AFS license

If the corporate entity can demonstrate that it can meet in a basic standard in areas such as compliance, dispute resolution, training and insurance, then ASIC is legally obliged to issue the AFS licence to the broker. Once the AFS licence is approved by ASIC, the broker will be issued an ASIC number. This number help to give binary traders in Australia the assurance that their legal rights will be protected by ASIC and there is a chance for reprieve should the broker act illegally.

With regulatory oversight in the Australian binary trading industry, ASIC is able to achieve several objectives. First, investors will become more confident about investing in the Australian financial markets. Since the industry players are constantly being monitored by ASIC, investors need not worry about becoming victims of fraud. Secondly, with the presence of ASIC in the financial markets, this helps to inject a sense of stability into the markets. Ever since the 2008 subprime lending crisis happened in the U.S, regulations have been designed to ensure that the industry players do not cause a cataclysmic catastrophe in the financial markets.

Finally, as the industry watchdog, ASIC ensure that financial services providers are accountable for their actions. If a particular broker were to commit a wrong in its dealings, it can be certain that ASIC will step into the picture to rectify the situation. For Australian based binary traders, they are at an advantage when compared to traders from other parts of the world. This is because through ASIC, they can ascertain the regulatory status of their broker. And if they have any complaints about their broker, they can forward their complaints to ASIC which in turn will investigate offending broker and take any legal action if necessary.

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