Monday, December 30th, 2013 by Michael Freeman
As the demand for the binary options OTC continues to grow, new regulations are being implemented in countries around the world and the latest update comes from Japan, as the FFAJ, Japan’s Financial Futures Association, put in place a detailed set of rules for binary options brokers seeking to become regulated in Japan. The rules are set to protect investors from possible scams, unfair payout structures, casino type features and lack of transparency. Once the regulations will take full affect and enforced, brokers offering binary options in Japan will be required to provide Japanese traders with an alternative to the correct ‘platform setup’ and features. Let’s explore some of the new rules that are to take affect:
- Price Expiry It didn’t come as a surprise that according to the new FFAJ regulations, binary options brokers will be required to offer longer expiry time frames not less than 1 hour. 30 minutes, 15 minutes and 60 seconds will not be available according to the new rules. The 60 seconds feature will not be permitted due to it’s ‘Casino-like’ nature, as price is very volatile and unpredictable over very short time-frames.
- Trading Closing Time There is a growing concern that binary options brokers close the ability to enter into a trade 10-15 minutes before the expiry, therefore the new FFAJ regulations will require binary options brokers to allow traders to enter into a trade up until moments before expiry. The OTC model is required and greater transparency will be put in place by brokers in order to provide traders with a safe trading environment.
- Binary Options Bonus Based on the FFAJ ruling, cash incentives and bonuses used to attract traders and influence their judgment will be ‘out of boundaries’. Brokers will no longer be permitted to offer these cash incentives which often cause a lot of confusion and mislead traders into locking their money with the broker, with a VOT Requirement (Volume Of Trades).
- Qualifying New Traders Binary Options Brokers will be required to ensure that new traders are in a ‘financial position’ to trade with high risk. Similar to Spread Betting, traders will be required to provide with proof of income and sufficient capital in order to initiate a binary options account. Traders will be required to possess fundamental knowledge on binary options trading and brokers will be required to provide a free training before allowing traders to invest real money.
- Changes In Option Values Changes in option values before expiry must be displayed by changes in option premium or trade prices. The FFAJ has rules out how brokers show changes in value only by payout amount. Binary options brokers will be required to offer a series of prices in order to maintain compliance.
The new regulations on Binary Options in Japan may lead to tougher regulations in other countries around the world, possibly to a global standard set forth to ensure the greater transparency and safety for binary options traders. The elimination of bad business practices is necessary to protect newcomers from many of the risk factors that are involved with high risk trading. Thank you for taking time to read about the new regulations in Japan.
For more information on binary option brokers, checkout the list of Recommended Binary Options Brokers.