The history of binary options regulation could be traced back to 2008 when it was publicly introduced as a trading asset at the Chicago Board of Exchange (CBOE).
During this year, the global financial system suffered a great fall and as a result there was also a fall in investments too. Taking into account the financial crisis during 2008, it was necessary to create a system that provides easy access for beginner traders and this led to the introduction of binary options as a new way of investing for average investors.
Although binary options gained popularity during 2008, this investment has been present for several years by that time, but was only accessible to banks, financial institutions and high net worth investors in the over-the-counter (OTC) markets.
For most investors, the entry of binary options was a revolution in the world of investment, and this step marked a significant change in financial markets. Since 2008, binary options have begun to expand at an extraordinary speed, making it one of the most preferred mode of investing.
Also, the introduction of binary options by CBOE was a relatively straightforward way for all investors to act on their views on two indexes followed by the S & P 500 and the CBOE Volatility Index. Since 2008, SPX options have grown to almost 65 million contracts, expanding the financial market with colossal parameters.
How Binary Option is regulated in Europe
Binary options are also trendy in Europe. Even a large number of brokers are from European Union countries. However, binary options are not legally enforced in most European countries but have not been designated as illegal activity or investment.
In Europe, Cyprus was the first state to undertake the first steps to regulate and protect investors and brokers. In 2012, Cyprus (CySEC) placed a binary option on the list of financial instruments to anticipate the next step to strengthen the law regarding the binary option.
After Cyprus was also the United Kingdom that created separate legislation for the binary option, reflecting also on other EU states that they should also accept this trading method.
How Binary Option is regulated in Australia
While Australia is almost the most significant binary options market, the issue of legitimacy of this investment in Australia has become very sensational. So Binary Options are very regular in Australia, and the ASIC regulatory body has taken various steps to regulate all brokers operating in Australia.
Given the rapid spread of binary options, various authorities have taken action and have offered warnings about the misuse of some companies that provide investment services. So SEC (US Security and Exchange Commission) and CFTC (Commodity Futures Trading Commission) have issued an Investor Alert to warn potential investors about the misconduct that some companies have done. According to this report, there are many non-licensed operators who have made fraud in investment software to undermine investment data. Also, the SEC in cooperation with CFTC has reported that the main problem lies in platforms where it can be traded with binary options. These placemats operating only on the internet site are not very reliable and are not in line with the US regulator. Thus, most of the complaints are about these platforms because they often have deceived their investors.
Seeing these actions, the European Union is quite skeptical of the binary options as a large number of citizens have been deceived by these tricks.