The CSRC or China Securities Regulatory Commission has recently issued a warning to its citizens not to trade binary options. The move is unusual for the Chinese regulator that has not taken such a definitive position on a trading product in the past.
In the statement, the CSRC compared Binary Options trading to gambling. They also warned that since all of Binary Options providers are located outside of the People’s Republic of China there was no recourse for Chinese clients and no protection. They have instructed Chinese traders to stop Binary Options Trading immediately. The CSRC has also instructed that if any of these traders have suffered losses they should report these losses to local authorities.
One can only imagine the volume of complaints the CSRC must be processing to have to come up with such a decisive and final decision. It seems that it is on a daily basis that different regulators are adding new Binary Options brokers to the bad broker list. Recently the CFTC just expanded its infamous red list by another 23 brokers.
Usually, Regulators take action when the most egregious cases are occurring. Many of these instances are probably caused by unregulated brokers that are most likely to target any region and wreak havoc. The regulation does not insure good behavior as we saw recently in Cyprus as the European regulator dramatically changed their rules due to the high number of complaints originating from CySEC regulated brokers. French regulators recently noted that 85% of their complaints were coming from CySEC binary options brokers.
Binary Options Brokers need tread lightly if they want to factor in any form of regulation in the future. The number of jurisdictions that allow Binary Options Trading will most likely decrease which may move the product back offshore.
Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary.