Investors in the UK most interested in binary options according to FCA data

[mlawson71]

It looks like the largest part of UK investors seek information and advice on binary options. Enquiries on binary options make up 17% of all enquiries on investment products at FCA Consumer Contact Centre, while those on forex account for 13%. The data is from the latest Data Bulletin of the Financial Conduct Authority (published February 2017) and covers the twelve-month period from 1 December 2015 to 30 November 2016.

Typically, the FCA refers consumers with such enquiries to the Gambling Commission, as binary options in the UK are classified as a gambling product (rather than a financial one) and currently are not under FCA’s regulatory scope.

This, however is about to change, as according to the Markets in Financial Instruments Directive II (in effect from 3 January 2018) the government's economic and finance ministry (HM Treasury) is bringing certain types of binary options within its regulatory scope. This means that these binaries will be regulated by the FCA.

So other regulators are looking to ban binary options altogether but the FCA wants to start regulating them? Am I the only one a little confused by this?

 

[globalarbtrader]

It looks like the largest part of UK investors seek information and advice on binary options. Enquiries on binary options make up 17% of all enquiries on investment products at FCA Consumer Contact Centre, while those on forex account for 13%. The data is from the latest Data Bulletin of the Financial Conduct Authority (published February 2017) and covers the twelve-month period from 1 December 2015 to 30 November 2016.

Typically, the FCA refers consumers with such enquiries to the Gambling Commission, as binary options in the UK are classified as a gambling product (rather than a financial one) and currently are not under FCA’s regulatory scope.

This, however is about to change, as according to the Markets in Financial Instruments Directive II (in effect from 3 January 2018) the government's economic and finance ministry (HM Treasury) is bringing certain types of binary options within its regulatory scope. This means that these binaries will be regulated by the FCA.

So other regulators are looking to ban binary options altogether but the FCA wants to start regulating them? Am I the only one a little confused by this?

At the risk of stating the obvious banning is an (extreme) form of regulation... you can't ban something that isn't regulated.

I would imagine the FCA would bring in extremely tight controls on binary options; 90% of the way towards a complete ban.

GAT

 

[Tim Smith]

@mlawson71

I think you are misinterpreting the data.

First, addressing your statement "It looks like the largest part of UK investors seek information and advice on binary options"

I suspect you will find that UK investors are not contacting the FCA to ask "how can I invest in binary options" !

I suspect you'll find the majority of calls are complaints or concerns, which, given binary's status as a gambling product in the UK is therefore presently outside the FCA's remit. This means that the FCA has to tell the caller to "go away", they are not presently empowered to gather data either from consumers or from industry.

Second, by bringing binaries under the remit of the FCA, the FCA will have powers to gain further insight they need.

My guess would be that rather heading for an outright ban, the FCA's plan is to tighten up significantly on the regulatory context, which would by its very nature force companies operating in the UK to tidy up their act.

Of course this may eventually lead to an outright ban in the UK, but for now the FCA appear to be preparing to give the industry "one last chance".

 

[southall]

I can imagine some poor guy buying a binary for 90 and thinking they have an almost certain chance of making money.

Then within a few minutes they lose £900, after thinking they are almost sure to win £100, that happening a few times and they will probably go running to the FCA thinking they have been ripped off.

Also in fast markets they will sometimes not be able to get out without a few bet rejections, and finally getting out at a much worse price than expected, this will make them feel even more ripped off.

And this is the legit binary providers, who knows what the bad ones get up to.

 

[prc117f]

Forex and Binary options, billions a year removed from the pockets of idiots.
I am not to familiar with Binary's but do people actually wager 900 in the hopes of making a 100 dollar win? That does not sound right.

 

[southall]

Forex and Binary options, billions a year removed from the pockets of idiots.
I am not to familiar with Binary's but do people actually wager 900 in the hopes of making a 100 dollar win? That does not sound right.

People do crazy things when they go on 'full tilt' after a string of losses.

Every regular short term trader is familiar with the concept of revenge trading and trying to get back to break even.

Buying a massively over priced in the money short term option minutes before expiry will seem like easy fast money to a new trader who isn't familiar with extreme price moves yet.

And the binary options that are offered priced at 90 really only have a fair value of 70 or less. But the gamblers will take the offer anyway. The bookie always over prices them and uses a huge bid/ask spread so as not to get picked off the other way.