Japanese Regulation for Binary Options Trading
As binary options trading is gaining popularity worldwide, more and more nations implement various guidelines and regulations that brokers must follow if they want to get an official license from the state. Cyprus is the first country to do this; the others, however, are not far behind in this process.
Japan is one of the most important and largest binary options markets in the world. Despite this immense popularity, Japanese government has not yet implemented the guidelines that enable brokers to apply for a license.
A few months ago, however, the Financial Futures Association of Japan (FFAJ) released a report which may act as the guideline for a newly created work group in developing the above-mentioned regulatory framework. Whether this process will be finalized is not sure yet, but experts believe that binary options could finally be regulated in this country some times during this year.
Japanese Guidelines for Binary Options Regulation
As said above, a few months ago the Financial Futures Association of Japan has released a set of guidelines and proposals for the regulation of binary options. Most of these guidelines are about the functioning of binary options brokers and the marketing of options trading services. Check out Best Japanese Binary Options Brokers.
Minimum expiration time of 2 hours
This measure aims to make binary options trading become more professional by getting rid of the option types with shorter expiration times, whose results mostly depend on luck. Brokers, however, argue that this rule would just encourage traders to keep trading at unlicensed and illegal brokers as these brokers are still able to offer shorter-term options.
Requirement to clearly point out that if contracts will finish out of the money traders will lose all their investments
This measure has already been enforced and applied by the majority of brokers.
- Disclose the profit and loss combined with the ratio of profits and losses incurred by traders
- The implementation of so-called “Know Your Customer” questions based on which brokers will have to establish maximum losing limits on customer accounts based the customers’ knowledge
- The prohibition of advertising binary options as “easy investments”
- Fixed payout rates that won’t change during the lifetime of an option
- A common strike price for each contract
- Brokers will be prohibited from unexpectedly suspend trading for no reason
- Various rules for data collection and monitoring
Although most of these guidelines are appropriate and in fact already applied by most brokers, some of them are still highly restrictive. The measure of banning options contracts with expiration times less than 2 hours, for instance, would encourage traders to register at unlicensed brokers.
Unlicensed brokers who operate from offshore jurisdictions do not have to conform to these guidelines. These brokers can also avoid legal consequences in Japan. And if unlicensed binary options brokers offer traders more attractive services than legal ones, the whole idea behind regulating binary options in Japan will end up a failure.
One biggest fear of experts is that the Japanese market will eventually become the same to the US market, where because of extremely weird and protectionist nature of regulations, most brokers have decided to continue their operation offshore jurisdictions without applying for a legal license. Check out Best Japanese Binary Options Brokers