Binary Option industry creates EUBOA
As the binary options landscape starts to mature, some of the largest organisations in the industry have come together to form EUBOA – The European Brokers Association. Here, we explain who is involved, and what the aims of this new body are.
What is EUBOA?
The binary options industry is still in it’s infancy, relative to other forms of investment. This has led to substantial ‘growing pains’ as well as a number of episodes which have severely damaged the image of both the industry and the investment vehicle itself.
The European Brokers Association (EUBOA), was created in the late summer of 2016. The aims are simple:
- Establish a manifesto and code of conduct
- Communicate directly with European regulators
- Improve the image and professionalism of the industry
2016 saw a host of regulators impose harsh restrictions, or even complete bans, on binary options. This was in response to the number of fraudulent operators working in binary options, and the scale of complaints regulators were seeing. Largely from unregulated or unlicensed operators.
Legitimate brokers are keen to restore the image of binary options, but realise there is much to be done in order to restore faith in the industry. They hope the EUBOA will give them a strong, self-regulatory platform. From here, the aim will be better dialogue with regulators, with the objective of creating a number of ‘best practices’ among binary brokers and much improved customer service.
Who is involved in EUBOA?
Most of the established binary options firms, or platform providers are involved:
Brokers
- IQOption
- Banc de Binary
- 24Option
- AnyOption
Platform Providers
- TechFinancial
- SpotOption
This represents a large proportion of the binary options market share, and therefore gives the EUBOA plenty of clout.
What are the frequent binary options complaints?
Some of the issues facing this new body, will include:
- Marketing channels, Affiliates and the miss-selling of binary options. A huge problem in binary options is the marketing of binary options as a “get rich quick” scheme. This form of marketing is often used by affiliates, but also by the brokers themselves. Often referred to as ‘funnels’, they grossly misrepresent the high risk nature of binary options and mislead potential customers.
- Unlicensed subsidiaries running within regulated brokers. This has been a very common problem. A broker regulated in the EU, would move traders who reside outside of the EU, to an unregulated subsidiary. This allows the broker to get around regulatory restrictions that apply in the EU, and puts the trader at significantly greater financial risk.
- Unregulated brokers using the software and services of platform providers. New brokerages will often setup as a ‘white label’, using the trading platform of a third party provider. These white labels are normally unlicensed and unregulated. They are also the most likely place to find unlawful or unethical behaviour. While the platform provider does not have absolute control over how these firms use their platform, the EUBOA will hope that via best practise and code of conduct guidelines, they will play a bigger part in ensuring the quality of the operators using their platform.
What should we expect from EUBOA?
It will be very interesting to see how this develops. Binary options firms are clearly concerned with the recent rise in regulatory pressure. It would however, take a huge amount of optimism to think that the industry could be self-regulatory at this stage.
The problems in binary options are many and widespread, so much so that the investment vehicle itself – the very concept of a “binary option” – has been tainted. While the setting up of EUBOA looks positive, those parties involved could do well to resolve the issues within their own businesses before suggesting a ‘code of conduct’ for others.
The appointment of Bjorn Krog Andersen is encouraging however. With 6 years experience in Legal and Compliance at Saxo Bank, and previous experience working in the law, his appointment does signal that the new body is going to be serious in tackling the issues in the industry.