In the recent past, the binary options market has experienced an increase in the number of regulated brokers. This increase is a result of concerns by potential traders who have been hesitant to deal with unregulated brokers. The fear of unregulated brokers came as a result of the existence of scammers who were able to disguise themselves as brokers. In the past, however, many binary options brokers were unregulated. This situation was subject to abuse.
The issue of regulation was a result of efforts aimed at stemming the tide of scamming in the binary options trading market. In an effort to protect traders and investors, regulators have been able to set parameters to help in the prevention of dishonest activities in the online binary options trading platforms. It has now become common practice for many traders and investors to deal with a regulated binary options broker as opposed to an unregulated one. There are many reasons why a trader prefers to use a regulated binary options broker. These specific reasons include transparency, security, and the protection of invested funds.
Traders are provided with more security when they deal with a regulated binary options broker rather than one that is not regulated. The main reason is that regulating authorities insist on certain security rules that brokers are supposed to adhere to. These tough security rules allow traders and investors to trade in environments that are highly secure. Traders are guaranteed that their personal and financial information are protected through a system of encryption and other security features.
Signs of security from a registered broker can be seen when a trader wants to open a trading account. The trader is required to show proof of identity. This is a requirement that has been set up by the regulatory authorities and is meant to offer protection against incidences of fraud, terrorism, and the regulation of international transactions.
The purpose of regulating brokers in the binary options market is not only to provide security but also keep scammers at bay and create a better trading environment. As brokers are regulated, scams may be prevented. By providing adequate security features cases of money laundering have been greatly reduced. It is also nearly impossible for one to use a trader’s card. When such security measures are observed, it gives a clear indication that the broker is a serious professional.
Binary options traders who are regulated create an atmosphere of trust due to the fact that they operate under the rules of the regulating authority. In this sense, they are incapable of manipulating market prices in their favor as this will be a violation of the rules set up by the regulators. However, when dealing with an unregulated binary options broker, a trader is never sure if he is being scammed or not. This uncertainty is what many traders avoid and prefer to deal with those brokers who are regulated.
Protection of Investments
Another important aspect when it comes to regulated brokers is the fact that they are able to honour withdrawal requests by traders and investors in a prompt manner. It is, therefore, important to deal with a regulated binary options broker so as to safeguard your investments. It gives the trader a peace of mind knowing well that their investments are safe and that the trade deals are honest and legal. A regulated binary options broker are not able to violate the rules that have been set by the regulating bodies. A binary options broker that engages in any form of malpractice can have his regulated status stripped and thereby, putting his reputation at risk.
In cases where a brokerage firm in the binary options market suffer a financial blow or is dissolved, the investments of the investors are protected. This is because the regulatory authorities have rules which protect the consumer in the case of such incidences. There are rules and regulations which required the affected brokerage firm to offer consumer compensation to investors in the case of a business failure or dissolution.
The compensation funds have the sole purpose of enabling the investors or traders in the affected firm to recover part of their investments based on regulatory guidelines from the regulatory bodies. A similar situation also arises when a trader is scammed. This is a very unlikely scenario when dealing with a regulated broker. But in the unlikely event that it occurs, it becomes the job of the market regulator to make sure that you get compensated.
Transparency is an important factor that makes a trader or investor turn to a regulated binary options broker for his/her investments. The regulated broker provides transparency in all aspects of his business and this is good for the trader. There are reporting requirements which require a broker in the binary options trade to reveal his true identity.
This requirement makes it easy for the trader to know with whom he is doing business with. The brokers are also required to provide information to traders about the identities of people that they are doing business with. This makes it easier for the trader or investor to have a clear picture of the firm that he is dealing with. This type of transparency boosts the confidence of the investor or trader and makes him/her feel comfortable to trade online in binary options.