The background of trading in binary options stretches back forty years. Already in the early 1970s, one could trade in binary options over-the-counter (OTC). That’s when large companies began trading shares and this happened on site between buyers and sellers. The form of trading was In the money or Out of the money and there was no form of regulation of the trade.
1973 the Chicago Board of Trade Chicago Board Options Exchange was founded, and rules for trading in options were introduced. Soon, more and more markets began to emerge. Although there were rules, the trading in binary options was not regulated by the stock market. It was a complex market and it wasn’t always easy to find suitable acquisition targets.
INTERNET, CON MEN AND SCAMMERS
In 2008, during the economic crisis, the Securities and Exchange Commission decided that binary options would be offered as financial instruments with a low risk profile for private investors. During this time the trading was still done in the stock market and not via the Internet the way we see today. Soon Banc De Binary was founded and began offering trading in binary options online.
Following this, shoddy brokers began to appear on the market. This could, for example, be companies that didn’t leave investors’ money in a separate fund, so that if the broker ran into a slump, they would simply take their clients’ money to pay their debts. Of course there were also pure scam brokers and con men, as you always find on the Internet.
A BAD REPUTATION LED TO LICENSING
This contributed to binary options getting a reputation for being fake or scam. That it was frivolous and that investors just got cheated out of money. Unfortunately, some of this was true. As a reaction to this Cyprus was the first country in the EU to create a regulatory framework for trading in binary options in 2012: Cyprus Securities and Exchange Commission (CySEC). The platforms for trading in binary options that were active in Cyprus had six months to submit a license application to the CySEC. As Cyprus is an EU country, they must also comply with the EU directive on markets in financial instruments (MiFID). The following year, in 2013, Malta regulated trade in binary options, which means that trading platforms in Malta must meet the requirements set by the Malta Financial Services Authority and MiFID.
THE FUTURE FOR BINARY OPTIONS
There is a constant development of binary options as financial instruments. Now traders can trade in binary options with a better guarantee of safety. All reputable brokers offer trading from mobile devices. Newer options contracts are under development. Automated trading is starting to take hold in the market. We can expect more positive changes in the coming years.
WARNING AGAINST SHODDY OR SCAM BROKERS
Thus, you should always trade through a platform which is licensed, and most preferably is regulated by Cyprus or Malta, and therefore also the EU. It obviously doesn’t mean that you aren’t still taking a risk and can lose your investment, but as you are dealing with reputable and licensed brokers, they also often have a demo account for new beginners to start learning how to trade in binary options. You can trade in virtual currency and thereby eliminate the risk of losing your money. Once you’ve gotten your feet wet, you can start investing for real. Reputable brokers even supply training material such as e-books, webinars, courses on YouTube and the like.