Binary Options Regulation in Australia
Friday 13th February, 2015
ASIC has today warned against dealing with an unlicensed binary option provider Opteck.com, cautioning all Australian retail investors about the risks of dealing with unlicensed binary options providers.
A binary option is a financial product, in particular a derivative, under the Corporations Act. Any entity that deals in, or provides advice about, binary options to Australian investors must hold an Australian financial services (AFS) licence, or be authorised by an AFS licensee.
Opteck.com is operated by Belize-based company B.H.N.V Online Ltd (BHNV). BHNV does not hold an AFS licence, nor is it an authorised representative of an AFS licensee.
Opteck.com has been marketing binary options to Australian investors by publishing online advertisements aimed specifically at Australians, offering exclusive deals to Australian investors and publishing articles aimed specifically at Australian investors.
Following concerns raised by ASIC, BHNV has undertaken to stop marketing and offering financial products and services to Australian investors.
ASIC Commissioner Cathie Armour said, ‘ASIC urges all investors considering trading in binary options to check they are dealing with an entity that holds an Australian financial services licence or is authorised by an Australian financial services licensee and regulated by ASIC. This can be done by searching the Professional registers on our website.
‘Dealing with licensed financial services providers that are regulated by ASIC affords certain protections to investors and imposes specific obligations that do not apply to unlicensed providers.
‘Binary options are relatively new products in the Australian market so investors might not fully understand the risks, even where the provider is licensed. We urge anyone interested in trading in binary options or other derivatives to make sure they understand what they are getting into and check they are dealing with an entity that is licensed to provide these products in Australia’, Ms Armour said.
Many binary option providers operate through online platforms and have been marketing and offering binary options to Australian retail investors.
Binary options allow investors to make an outlay and take a position on whether an underlying asset, such as a share, will either rise or fall in price by a set time. Unlike most options, where the payoff usually varies depending on both which direction the asset price moves and by how much, binary options only provide a fixed pre-determined payoff depending on which direction the asset price moves. If the asset price does not move favourably for the investor, they will likely lose their entire outlay.
ASIC’s surveillance of the binary options industry continues its work in the margin foreign exchange and contracts for difference sector.