CySEC the Cyprus regulator announced proposed changes to Binary Options regulations. These proposed changes address many problems and should help standardize binary options pricing and trade execution issues. One of the biggest and most notable changes is that the binary option contract will have a bid and ask. Prior to this brokers were using an arbitrary price that loosely correlated to the underlying asset. Now it looks like there will be standards set on where the price feed comes from as well.
CySEC Binary Options Regulations Require the Ability to Close Orders
The new binary options regulations will also allow traders to exit a position prior to the expiration of the option. This is something that was unheard of for most brokers and will probably require a good deal of implementation on the part of the brokers and the software providers.
CySEC New Binary Options Regulations Means Challenges for Existing Brokers
Most binary options brokers were operating on a much simpler level. They would offer an up/down choice on the asset and the trader would simply select the direction and the amount traded. Now it looks as if they will have standardized contracts. This will be very challenging for brokers that could not handle basic AML and KYC procedures. It is a safe bet at these changes will most likely move many of these binary options brokers offshore.
Shortest Expiry is 5 Minutes
Another major change would involve the limitation of the expiry times allowed by brokers. Currently, many binary options brokers offer 60-second options and some even with shorter expirations. The new CySEC binary options regulations will limit the shortest expiry time to 5 minutes. Binary Options brokers will have discretion on expiry times if they are greater than the 5-minute minimum.
While these changes are a great start, the question remains if these proposed changes are too little too late. Binary options brokers have taken a huge reputation hit in the past year and things don’t look to improve anytime soon.