Binary options offer something that traditional stock or forex investment does not: the possibility of making quick profits with a lower risk level involved. With binary options, traders know exactly how much they could potentially gain and how much is at stake to lose prior to opening a trading position. This type of trade exists since 2008 but it is only in the past few years that it has gained in popularity. Since it is relatively new, the information available is still sparse and can be quite confusing.
Australians are paying particular interest to binary options since it offers many advantages over other forms of trading. Since Australia is one of the largest financial hubs in the world, brokers have a vested interest in recruiting traders within the country. As a trader, you may be wondering if binary options are legal in Australia, and if so, what the specific regulations are about this type of trade. Below, you will find a summary of the information you need to know to start trading binary options in Australia.
As it is the case with several countries across the globe, it is legal to trade binary options in Australia. There are currently no laws in effect within the country that prohibit the establishment of brokerage firms or that prohibit foreign firms from targeting Australian traders. Since binary options are quickly becoming the number one investment option for traders, the Australian government has made it a priority to evaluate the industry and set clear operation guidelines in order to institute safe trading parameters for investors. The government sees binary options as a positive addition to the already well-established forex and stock markets; it a fresh and interesting way to trade which caters to traders of all levels.
Binary options have only recently been regulated in Australia and as such, only a limited number of brokers and platforms have their headquarters located in the country. The regulatory body responsible for the regulation of binary options is the Australian Securities and Investments Commission (ASIC). ASIC is under the responsibilities of the Australian government, more specifically the Parliamentary Secretary to the Treasurer. ASIC has the authority to regulate Australia’s financial markets, financial companies, as well as any financial service organizations and professionals. With service centers located in every major city within the country, ASIC has established its credibility and authority as a corporate regulator. Traders count on the regulatory body to obtain all the latest information on safe trading practices and any news about possible scams or unregulated brokers.
ASIC’s scope of practice used to be limited to financial service institutions. However, its role was broadened in 2010 to encompass a variety of mandates. ASIC’s current role is to ensure fair and transparent financial dealings within the country. Governed by the Australian Securities and Investment Commission Act, ASIC is required to maintain and improve the financial system’s performance, promote investors participation in financial transactions in a confident and informed manner, administer and enforce laws where applicable, and render information about financial firms available to the public in a timely fashion.
One of ASIC’s top priorities is to ensure consumers have the confidence to invest, as this practice contributes to the well-being of Australia’s economy. In order for investors and other financial consumers to feel empowered, the organization provides many educational opportunities with regards to investment options, risks, and rewards. It also acts as a gatekeeper between financial organizations and consumers by ensuring proper supervision, competition, and governance of those involved. Any misleading and deceptive conduct from financial brokers, including those offering binary options, will be condemned by ASIC.
In an effort to streamline the binary options industry within Australia, ASIC thoroughly assesses financial markets to ensure compliance with a specific set of standards and rules. Since 2010, ASIC is responsible for supervising the binary options market.
With the regulation of binary options brokers in Australia came the creation of strict guidelines affecting the terms and quality of services offered from binary options providers. Providers are held accountable and have an obligation to operate with transparency and fairness. This is crucial to maintain the high level of confidence of traders in the binary options market, therefore, any financial organization who attempts to derive from that will be subject to the appropriate sanctions as determined by ASIC.
In order to obtain proper registration and licensing, every binary options company within Australia must seek an Australian Broker License. The application and approval process is straightforward and firms meeting ASIC’s criteria of eligibility will be issued a broker license.
Brokers understand the importance of being licensed as it establishes credibility and ensures traders’ safety. The binary options market is new but very competitive already, which means that licensing is essential for a broker’s long-term success. As a trader, you can feel confident signing up with a broker registered with ASIC as it has to abide by a strict set of laws and regulations, and is monitored on a regular basis.
Many regulatory authorities in Australia are an excellent resource for traders to refer to with questions about finances, trading, brokers, and binary options specifically. When in doubt, it is always best to consult with the proper authorities, as they are the ones who work to ensure all financial systems across the country are stable. With your hard-earned dollars on the line, you want to make sure you have all the information you need to make good trading decisions.
As mentioned above, ASIC is the regulatory body for binary options. In operation since 1991, ASIC’s role has evolved over the years. Its current functions were set out in the Australian Securities and Investments Commission Act in 2001, and in 2010, the supervision of many trading markets was added to its responsibilities.
The Council of Financial Regulators, known as CFR, is the agency coordinating Australia’s financial regulatory agencies. Its mandate is to assist with improving efficiency of regulations as well as promoting the stability of the country’s financial markets. ASIC is a member of CFR, as is the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority (APRA). CFR’s role also entails advising the Australian government on financial regulatory systems. CFR is a great source of information for traders interested in financial stability data as well as regulatory developments.
The Australian Prudential Regulation Authority (APRA) regulates the Australian financial services industry. Established in 1998, APRA supervises major banks, credit unions, insurance companies, societies, and the superannuation industry. Traders wanting to have statistical information may refer to APRA. Its main role is to ensure the protection of the financial welfare of consumers. It does this by holding institutions accountable for providing a stable and effective financial market.
For Australian traders, entering the binary options trading field always starts with the question of which broker to choose. Since regulated brokers in Australia are still few and far between, it may be tempting to sign up with a foreign brokerage. For the highest level of protection, traders are better off choosing a firm operating within Australia with a license number from ASIC. This option provides the best consumer protection as well as the opportunity for reprieve should it be required. For traders who feel this may be limiting, foreign brokers may be an alternate choice. With foreign brokers, the most important aspect is to ensure regulation by a regulatory body. Outside of Australia, the majority of brokers are registered with the Cyprus Securities and Exchange Commission (CySEC). While these brokers are not subject to Australian laws regarding binary options, they do have to abide by standards set by CySEC.
Brokers generally offer a variety of assets for traders to choose. As with any type of investment, you want to maximize your profits with the lowest level of risk possible. A simple way to do this is by trading options that are most familiar within the country. For example, you could choose to trade options that involve the Australian currency. Since it is the country’s currency, you would have easy access to current financial information as well as many sources for options signals that could guide your decisions about which positions to open.
Other than your country’s most prevalent assets, you should always strive to pick assets you have a certain level of knowledge about or are willing to learn about. Binary options are typically seen as an easier way to make profits; however, they still require a solid understanding of the financial markets and assets at play for maximum returns.
Best practices for trading binary options
Binary options may be less risky than other traditional forms of investment but the potential to lose significant sums of money is very real when traders do not thoroughly understand the process. A few basic best practices include the following:
- Sign up with a respected broker, preferably one licensed with ASIC. Otherwise, foreign brokers registered with CySEC may be another valid option.
- Consider your budget and never invest more than you are willing to lose.
- Trade familiar assets such as currency pairs involving the AUD, Australian Index, or other major Australian Companies – use reputable Australian sources for up to date financial markets information.
- View trading as a learning experience: markets evolve and the world of finance is far from static. Never get too comfortable with trading and always strive to learn more. Knowledge is power; the more you know, the better your trades will be.
Future of binary options
Since the current binary options regulatory process is fairly new, it will likely develop further and get modified over the next few years as more brokers enter the country and seek licensing. One aspect that consumers can be confident will not change is ASIC’s strict standards which brokers must meet to obtain registration. ASIC’s market regulations allow traders to have a unique binary options experience in Australia; the guidelines are clear, which means that traders know exactly what they are getting into when signing up with an Australian broker. Also, since complaints can emerge from even the best of companies, ASIC has a thorough process in place to assist traders and investigate the issues.
ASIC takes it mandate to heart and has already shown how serious it is about regulating the industry; in fact, it has already revoked the operating license of a binary options broker who did not respect the guidelines back in 2011.
Australians are in a great position to trade binary options. With regulatory bodies to back them and ensure all safety concerns are taken care of, traders can concentrate on what matters most, which is learning how to trade, developing strategies, and getting higher returns. Of course, with any type of investment, traders should exercise caution and report any suspicious activity to ASIC. Nevertheless, for the most part, ASIC’s strict rules allow traders to have peace of mind and focus on trading.