Unregulated Binary Options and Forex Brokers

One of the best ways to trade safely is to make a clear distinction between regulated and unregulated brokers. Unregulated brokers are brokers who don’t possess a valid license by financial regulators or government agencies in charge of regulating binary options trading. We do not recommend trading with unregulated brokers, as we don’t believe they offer proper security for traders and their money. It is always better to choose a regulated broker.

Brokers in the list below are unlicensed binary brokers.

Why Is Financial Regulation and Supervision of  Online Brokers Important for Traders

Many traders are wondering why is it so important to make a deposit with a regulated broker, especially when unregulated broker offers higher bonuses or better benefits.

The answer is simple – supervised and licensed brokers are obliged to follow all legislation and regulatory framework provided by the regulatory body. This means that customer protection is on the much higher level, as government agencies are always looking for a way to create safe conditions for their citizens. This leaves very little space for false advertising, manipulation, and other unethical business practices, as brokers can easily lose their license. However, in the past this has not stopped some regulated brands from behaving unethically.

Regulated brokers are serious companies, while when trading with unregulated brokers, there is a higher chance of being defrauded or treated unprofessionally. Trading with regulated companies gives users the opportunity to trade in safe conditions from the very start. There have been examples where regulated broker scammed customers, like with the EZTrader, however, unregulated brands such as TitanTrade, MyOption, Amber Option and others have been overwhelmingly responsible for most of binary options  and forex trading scams.

Why Are Unregulated Binary Options Brokers Often Dangerous?

Unsupervised brokers don’t necessarily have to be scams, but unregulated companies usually have fewer obligations towards the user. When it comes to regulation, binary options, CFD and forex are no different than other industries – the unlicensed status usually means higher risk since there is no incentive for the broker to treat customer fairly.

And while it seems that it is all worth it due to high payouts promised, traders must know that they may be exposing themselves, their data, and their money to companies that are operating ‘under the radar’ and with often questionable terms and conditions that can be considered quite unsafe for traders. This means, that rules of binary options or forex trading can change anytime if the broker decides so. Also, regulators are on the watch for unlicensed binary brokers which are marketed in their jurisdiction, and they are often publishing warnings regarding their operations in certain territories. It is not uncommon, that an unregulated broker simply disappears, and traders are left without any explanations or their money.

FFB’s general experience is that unregulated brokers are usually more prone to unprofessional behavior as we already mentioned. Unethical business practices are those that put traders in unfavorable position, often without them even knowing what is going on.

Examples of Fraud by Unregulated Binary Options and CFDs Brokers

Unethical business behavior is sometimes hard to recognize as it is disguised by flashy banners and great promises. Traders get so impressed, it takes some time for them to realize they were victims of sneaky terms and conditions, spam, cold calling and pushy ‘personal’ brokers.

Brokers Bonuses and Benefits When Trading Forex and CFDs

When it comes to unlicensed CFDs brokers, it often happens that they either add unauthorized bonuses that traders don’t want or simply have unfavorable bonus terms that traders are never warned about. This makes it almost impossible for a trader to withdraw their money, and they are literally forced to trade with the broker, hoping they will reach very high trading volume one day and get their money back. On the other hand, regulated brokers follow certain regulatory rules about bonuses and are obliged to warn trader about all conditions and possibilities. Read more about CySEC’s treatment of bonuses in forex and binary options industry.

Most regulators do not allow trading incentives or they simply set very strict conditions. This means that regulated forex broker will hardly be able to offer a 100% deposit bonus, or the conditions will be much more favorable for the trader than with the unregulated binary options or CFDs broker. ESMA and CySEC have been warning about these before they finally acted.

Binary Options Brokers Denying Withdrawals

This problem is frequently seen with unlicensed brokers. As the trader has no legal protection in form of a regulator, the broker simply decides not to pay him out. Processing withdrawals becomes a nightmare for the customer and the broker always trying to find an excuse. Instead of promised 5 working days, sometimes it takes months and a lot of effort for traders to get their money back, even when all terms are met.

Auto Trading and Managed Accounts Frauds by Unregulated Forex and Binary Options Brokers

Auto trading is a very popular way of trading when robot places trades instead of the trader after fast and precise market analysis. However, some unregulated brokers have their own robots that purposely place unprofitable trades or use this service without traders’ approval.

Same goes with ‘managed’ accounts when, alleged senior “market analysts” are placing trades instead of the trader and are promising high success rates, but are losing money instead. They often claim that they have permission to trade instead of the trader, but rarely offer any proof. Sometimes, traders lose their money overnight and don’t understand what happened, as they never gave permission for these types of trading. Some regulated brokers do offer so called PAMM accounts. Please see more about these in our forex trading article.

Cold Calling and Spamming

Unlicensed brokers sometimes use stolen customer data, or can easily send traders’ personal information such as phone number or email to other companies. This practice, that is extremely unprofessional, brings trades into unpleasant situations, and they no longer feel safe with their broker.

Personal data is private and confidential, but practices like this are ruining the reputation of all brokers – regulated and unregulated alike. There have been reports of customer data theft and sale, and CySEC has been specifying the types of privacy breach related fraud. You can report some of the issues you may be experiencing to CySEC, however, if its an unregulated entity, they are not likely to be of help.

Regulated vs. Unregulated CFDs Brokers

Of course, this doesn’t mean that all unregulated CFDs brokers are unprofessional. Some of them are good in many aspects but are simply missing the license. However, we at Fair Forex Brokers consider regulated status more important than ever, as we put our readers in the first place. Many readers who reached for our customer support experienced issues when trading with unregulated brokers.

Regulation has many benefits for both brokers and traders. By gaining a license, binary options and forex brokers are becoming legit companies that are trustworthy and reliable as much as the regulator allows. Thanks to regulation, both sides know what to expect, and what their obligations are. There is no space to maneuver with bad business practices.

Here are some examples of obligations of regulated forex and CFDs brokers that are promising fair approach towards users:

  • Customer verification
  • Customer insurance
  • Segregated funds
  • Authorisation of bonuses
  • Fair advertising
  • Professional customer support
  • Frequent business reports sent to regulating agency/commission

Unregulated forex brokers are not obligated to follow these rules by any means. It all comes down to good will and ethical code of conduct. By choosing an unlicensed online broker, traders expose themselves (and their money) to much higher risk that rarely pays off. Nothing stops unregulated broker from spending traders’ money on a company trip, or from adding bonuses with impossible terms and conditions. They can use any tactic they like with their customer support and simply disappear overnight.

Also, some regulators (like CySEC) have investor compensation fund in a specific amount in case the trader has difficulties withdrawing the money because the broker cannot meet all the obligations towards the trader. This means that the broker regulated by CySEC is not able to return funds belonging to the trader that the broker still holds in order to provide investment services or return financial investments that belong to covered clients and company holds on its account. Find out more about CySEC Investor Compensation Fund.

Traders can also report any form of unprofessional behavior to the regulator, while in the case of unregulated brokers they are left on their own.

Crypto Brokers Regulation and Crypto Exchanges Regulation

More and more traders are interested in trading with cryptocurrencies. There are two ways of doing so, but it is a better choice to trade cryptos with a  regulated CFD broker where they are listed as another underlying asset, than with a cryptocurrency exchange.

Unregulated Crypto Exchanges – A Serious Issue in Online Trading

The main problem crypto industry is facing today is that there are many unregulated and unlicensed crypto exchanges. In fact, it is quite a task to find a regulated crypto exchange. There are some countries who are declining to regulate any crypto exchange due to unregulated status of cryptocurrencies itself. Only a few of them, including Japan, offer solid crypto exchanges regulation.

If you want to trade cryptocurrencies, we suggest you take a look at regulated forex and CFDs brokers that are offering cryptos as an underlying asset. Unlike with unlicensed cryptocurrency exchanges, when it comes to forex and CFD brokers, there are much smaller chances you will encounter withdrawal or verification issues. CySEC also published some rules on this matter.

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