Binary options industry is in a turmoil: the regulatory framework is tightening up, and customer protection has become number 1 priority for regulators all over Europe. For this reason, ESMA recommended a ban of all binary options bonuses and all other types of promotions that may cause overtrading.
In the very beginning of binary options industry, bonuses were used to attract new customers, and bonus policies were often hidden from them as there were no specific regulations about introducing traders to all terms and conditions. Bonuses were, and often still are, perceived as a free money, gifted by the broker, but the truth is quite the opposite.
What are Binary Options Bonuses?
Binary options bonuses are additional funds that traders can use for leverage and make more profit. Bonuses are always provided by the broker and have certain terms and conditions attached. Traders must understand how the bonus is not extra cash reward, but money that can be used for trading, but not withdrawn until the required trading volume is reached.
Trade with safe and regulated brokers like IQoption!
In most cases, the required trading volume is x20 or x30, which means that once the bonus is accepted it is very difficult to withdraw funds. Scam brokers still often use this technique to lock in trader’s money and prevent any withdrawals. As scam brokers are mostly unregulated, they are not obligated to follow any special procedures regarding introduction to bonuses. They can even add a bonus without trader’s permission.
On the other hand, regulated brokers, from spring 2015, have to follow a whole set of rules when offering a bonus. They have to introduce trader to all terms and conditions and have a written approval for adding the bonus. Read more about binary options bonus rules.
Binary Options Bonuses in Europe
Even though CySEC is known as the EU regulator, some countries prefer more localized regulatory approach. For example, French AMF is the main regulatory body in France, with the somewhat hostile attitude towards binary options. After multiple scam brokers used promotions and bonuses to take money away from traders, they simply banned binary options and forex advertising.
But did this solve the problem of unathorized bonuses and bonuses with bad terms and conditions? No.
As always when it comes to restrictions, regulated brokers were the ones who paid fines and had to adjust their business strategy. As unregulated brokers often operate on ‘no man’s land’ principle (as they are not regulated, are operated from one country, and have registered offices in another), they are hard to follow, and they are still doing as they like by using scam tactics. Spams, cold calling, etc are only some of their methods.
Once again, this new regulation will show who the best and the biggest binary brokers are, and what brokers can’t handle the regulatory pressure.
Future of Binary Options in Europe
The question is, if binary bonuses really get banned, what are the options for binary options brokers who want to attract new clients? Will this be the end of binary options trading as we know it and will it ruin the entire binary options industry? Binary industry is still pretty safe, but the rules of the game are definitely changing.
First and foremost, brokers will have to get more innovative and creative when it comes to their services and products. Constant improvements won’t go unnoticed by traders who are always looking for exciting new ways of trading.
Some brokers might change their operations and switch to binary exchange model that is becoming increasingly popular in the Europe, just like it became in the US few years ago. When it comes to binary exchanges, traders are trading against each other, which reduces the impact broker might have.
Some believe how smaller brands will create additional, non-regulated sister-brands and transfer all clients and operations there. Still, regulated status has a very important role in broker selection when it comes to most traders and such solutions can only be short-term. There is also an option to offer bonuses to non-EU clients only, which will require additional effort in Asian and other markets that have very specific demands and trading habits.
However, it seems that bonuses have a certain future that is not very bright. Some brokers will have to close down, while others will only have to adapt their business practices to new situation. Binary regulators have finally woken up and are no longer mere observers but active participants and policy makers. This makes all operational aspects of binary options industry more demanding, and it is to expect that some brokers simply won’t be able to deliver what regulators require.