Are Binary Options Legal?
Are Binary Options Legal? The plain and simple answer is YES of course they are….
Binary option trading is also called digital options trading. This is a special type of options trade where a contract is taken out in which there are only two outcomes that may occur. A trader who trades binary options will either finish in the money or out of the money. This is based on whether the price of an asset goes up or down based on the prediction of the trader.
This type of trading has been around for many years. In the past it was done as an over the counter transaction and there was very little regulation, if any at all. The CBOE (Chicago Board Options Exchange) was created in 1973 and offered a platform that was regulated to trade options on. This was the first environment available for trading options and is still the largest. However, after it was established other markets included options in their roster as well.
Regulations have increased over the years with the establishment of the OCC (Options Clearing Corporation) to ensure that the traders were buying and selling what they said they were going to. A temporary or lifetime ban may result for a trader that does not comply with the rules.
The trading of binary options offers an extension for trading options. The system uses an exotic mechanism that creates a much simpler and more transparent form of trade with much less speculation involved. The concept of binary options was created early on, but at the time they were treated as a simple instrument sold over the counter and because of this there was not a liquid market. At this point, the binary options that we have today that are purchased by a trader on their own were unheard of. Instead, binary options were simply a small part of a larger and more complex trading contract.
The Options Clearing Corporation proposed a rule change in 2007 to allow the trading of binary options on the major markets. This rule change was approved by the SEC in 2008. This made it legal for markets to list a binary option as a tradable contract. The American Stock Exchange was the first exchange to begin listing binary options. This occurred in the May, 2008. In June, the CBOE followed suit and began listing binary options as well.
There is a limit to binary options that are market traded, especially when they are compared to the number of binary options that are available to many online traders. In example, there are currently only to indices on the CBOE where a person may buy options.
The past few years have seen a change in the many online platforms and tools that make binary options more readily available to even the small day trader. While trading binary options on the major markets is highly restricted, there are fewer rules regarding trading binary options online. This is where the question of legality comes in for most people. As of right now, binary options are legal in all countries however some may limit what can be traded. For example in the US market US Customers may not trade Forex Digital Options, but there may be more regulations in place soon to protect both the trader and online brokerages. The simplest way to see if you will encounter any restriction is to signup at one of our recommended online binary option brokers.