The ease and simplicity which are the main features of online retail binary options trading are the primary reasons behind the rapid expansion of this industry that is being chosen by an increasing number of traders worldwide. As one would expect, one of the main financial services centres in the world, the UK, could not have remained intact by this sweeping trend of binary options trading expansion.
The trading of binary options has attracted much attention and gained extensive popularity against the backdrop of the economic recession, especially in EU countries, which has motivated investors in the UK and elsewhere to search for alternative investment opportunities and methods. Therefore, and despite the risk associated with predicting the future direction of the price of an asset, binary options have attracted many UK and mainland European investors as a relatively safe and potentially highly lucrative method of investment. In turn this has meant that many binary options brokers have set up in the UK to serve the needs of UK based as well as overseas traders.
What follows is an overview of the situation regarding binary options trading in the UK aimed at helping you discern whether and how you would like to take part in this growing industry.
Given the popularity that binary options trading has attained and also due to the huge number of binary options brokerages operated from and in the United Kingdom, let us have a closer look at the regulatory background and framework within which the UK binary options industry operates.
Is Binary Options Trading Legal in the United Kingdom?
As things stand currently, online retail binary options trading is both legal and regulated in the United Kingdom, meaning that all traders can trade such financial instruments online, via UK licensed binary options brokerages and that such brokerages are allowed to accept UK customers.
The UK was in fact one of the first European countries to allow and regulate binary options trader, as a spin-off of forex trading, which is extremely popular and has had a long tradition as an industry in the UK market.
The two paths currently available to financial service providers wishing to accept the customs of UK traders are either to apply for a UK binary options trading license or to apply for a license in another European jurisdiction that has a licensing system compatible with that of the UK. Obtaining any of these two types of license, allows brokers to legally offer binary options trading in the UK. Where the licensed is issued from, especially since EU applied rules are compatible and similar, makes little difference per se to traders, although here we should always remind traders to avoid trading through brokers who are unlicensed and unregulated.
Brokers licensed in other European countries
The current legislation governing binary options trading in the UK is similar and adheres to the same basic principles as the relevant legislation in all EU member-states, since the EU requires the application of uniform rules in governing the financial services and investment at community level, giving little leeway for regional or national variations. Thus, a UK - licensed financial services provider can freely offer its services in Germany as well and vice versa, while a broker that is, for example licensed in Cyprus, can also operate in the UK and vice versa.
In a nutshell we can say that all binary options brokers that are licensed and regulated in any EU member state, are implicitly also legal UK binary options brokers, because they all should operate under and adhere to the rules and regulations stipulated by the acquis communautaire In theory and in principle living in the United Kingdom and trading through, for example, an Italian broker is both from a legal and safety perspective exactly the same as trading through a UK licensed binary options broker.
We want however, to stress once again that it is wiser and safer to trade through brokers that are licensed and regulated, but although not illegal per se, trading through unlicensed, unregulated brokers is definitely much riskier.
UK Binary Options Regulations
The provision of financial and investment services in the UK, such as binary options trading, is currently a process regulated by multiple government agencies. Inter alia, these agencies are closely monitoring and over-looking both the online trading market and the activities and operations of the brokers, who are either licensed in the UK or whose licenses from other EU states were approved in the UK, allowing to provide services in the jurisdiction.
The UK Financial Service Authority
In the past and up until recently binary options trading was regulated by the UK’s FSA, an agency that was responsible both for the enactment of new regulations and proper enforcement and implementation of the existing ones. However, in April 2013 a decision by the government of the UK led to the disbandment of the FSA and the creation of two new authorities to take over its duties.
The FCA and the FPC
These two newly created entities, which succeeded the FSA, were namely the Financial Conduct Authority (FCA) and the Financial Policy Committee (FPC).
The FCA is primarily tasked with the drafting and enactment of new regulations and rules that will have to be followed by binary options brokers licensed to operate in the UK, while the FPC is responsible to ensure that these legal and regulatory provisions are indeed upheld by brokers. Through dividing the former tasks and duties of the FSA into to two, the government of the UK was aiming to make the regulation of this market more effective and efficient, given its rapid expansion and increasing importance as well as its complexity.
Binary Options Brokers Licensed in the UK
As already mentioned, the operation of a binary options trading broker in the UK is considered lawful in two cases. The first are those brokers who apply for and obtain a license that is actually issued by the UK pertinent authorities themselves, while the second case pertains to those brokers who have their licenses issued by other EU member states and are thus also allowed to operate in the UK as well, in compliance to EU norms. There is, in practical terms, no difference between these two types of licenses, since they both function under European Union laws and regulations.
At the end of this country report you can find a short list of brokers allowed to operate in the UK, either because they are licensed there or in other EU jurisdictions, that we are comfortable recommending because we consider them experienced, trust worthy and reliable.
We strongly urge you to check out these brokers as well as others which are featured elsewhere on our site, including our trust binary options brokers comparison table, to help you choose the right broker for you and increase your chances to trade binary options online safely and successfully.
Legal Requirements for UK Binary Options Companies
In order to set up shop as a binary options broker, or indeed any kind of financial services provider in the UK, companies are obliged and required to adhere by and follow certain strict rules and procedures.
The first requirement that comes to mind, one whose implementation is closely and regularly monitored by the FPC, is the segregation of accounts and funds, according to which companies should keep the funds deposited by clients in separate accounts than the accounts of the company itself. The reason behind this is to protect and safeguard the money of investors from any adverse events in the management or operation of a brokerage that might lead it to bankruptcy and the wiping away and loss of investors’ funds. Thus, the legislation requires that clients’ funds are deposited separately and are not to be touched to cover any of the broker’s operating costs or other needs. The way funds segregation is required by UK law and monitored by the local pertinent authorities has become a golden standard for the industry globally and has proven effective in protecting investors and traders from the potentially sinister acts of brokers.
Implications for UK Binary Options Trading
Every existing or aspiring UK binary options broker is required to show evidence of financial ability to provide full clearing and settlement for the total value of the trading activity of their clients from their own funds, without touching the clients’ separately deposited funds. Fulfilling this obligation pre-requires a massive liquidity and thus it functions as a safety net that does not allow crooks and scammers to enter the industry. The strict enforcement of this practice effectively ensures that only viable and financially capable corporate entities backed up by major banks can enter into the business of becoming UK binary options brokers, in marked difference to what happens in other jurisdictions where regulation is either totally absent or very weak.
The constant efforts and monitoring of the market and the adherence to the rule by the competent UK authorities guarantees that every broker properly licensed in the UK and featured on the FCA website is a truly reliable service provider for any prospective binary options trader.
Opening an Account with a UK Binary Options Broker
If you are a UK citizen or a citizen of any other European Union state wishing to open an account with a UK binary options broker, you will be required to submit the following:
Things are stricter when you are a citizen of any other jurisdiction (especially Africa and other areas apart from Australia or the US), since in this case in order to open an account with a broker you must submit:
The consistent and strict implementation of this system of checks ensures that binary options traders signing up with UK binary options brokers are reputable individuals, having no links to any kind of criminal activities.
Having established that in the UK both UK licensed brokers as well as brokers licensed in other EU jurisdictions are allowed to operate, these means that prospective binary options traders are faced with a massive number of alternatives when trying to choose which broker to trade through and trust with their money. Because choosing the right broker is a decision of paramount importance for a successful trading experience, take your time to study all the available options before committing to opening an account. As always, binaryoptionswire.com wants to make your life easier, so here’s a list of brokers that we consider trustworthy for trading binary options in the UK. The list is not exhaustive but it includes examples of brokers based in the UK as well as some who are not. However, all of them accept UK clients and offer customer support for them:
Established in 2010, binary options broker 24Option,a part of Mika Holdings Inc., is actually headquartered in London, UK. Accepting traders from all over the world except the US, this broker offers payouts of up to 89% for in-the-money trades, while also featuring high yield options where payouts can be as high as 310%. A highly respectable name in the global binary options industry it offers a truly extensive list of tradable assets across all major asset categories that can be traded through different instruments, such as High/Low and Above/Below; Touch/No Touch and High Yield Touch; Boundary and High Yield Boundary. Among the various expiry times offered are also short-term trades including 60 seconds, 2 minutes and 5 minutes.
Headquartered in Limassol, Cyprus and regulated by the local regulator CySEC since 2010, Banc de Binary has established itself as a market leader in the global online retail binary options scene. Although it does not have a physical presence in the country through an office in the UK, it services UK based customers through a local toll free telephone number for customer service and support. Provided they make a minimum initial deposit of $250, traders can then go ahead and choose between the 80 underlying assets offered by Banc de Binary and place their trades on its platform using instruments like One Touch, Option Builder, 60 seconds and BinaryMeta.
Headquartered in Cyprus since 2011, this broker accepts customers from all over the world, including US based traders. Although it does not have a UK office it has extended its customer service to UK clients through a dedicated toll free number. Whereas the payout offered for in-the-money trades can go up to 81%, TradeRush also returns up to 10% of the investment back to you in case your trade ends out of the money. Through the trading instruments of Option Builder, One Touch, Option Pro and 60 Seconds, traders using the TradeRush platform can invest on 100 different assets across all four assets categories, provided they deposit a minimum of $200 into their trading account.
Having started its operations back in the year 2008 anyoption is rightly considered as one of the pioneers in the field of online retail binary options trading. The broker’s base is in Cyprus, where it is also licensed and it does not have an office in the UK. However, UK based customers are serviced via a dedicated telephone number. Though the payout offered for in-the-money trades is slightly lower than other competitors, what makes this broker attractive is that it offers a return of investment up to 15% for out-of-the-money trades, which is among the highest in the industry. For a minimum initial deposit of $100 and for as little as $25 per trade, a trader can trade through various instruments such as Binary 0 – 100, Option+ and One Touch and place a trade choosing from a list of 104 different tradable assets.
Our United Kingdom Binary Options country Report and our Top Binary Options Brokers comparison table (a list of the most reputable and the best rated online brokers) are updated regularly, so check back again soon in order to be able to take a really wise decision when it comes to choose your Binary Options broker in U.K.
George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.