Malta’s Financial Services Authority, has today made the announcement that they are going to categorize Binary options as a financial instrument in accordance with the EU’s Markets In Financial Instruments Directive (MiFID). Malta’s financial regulators aren’t the first European regulator to recognize Binary Options as a financial instrument, with CySEC taking action to regulate the instrument back in 2012.
Other global regulators have also taken action in regards to Binary options, recently the Japanese FSA took tough action to regulate Binary options. Binary option platform providers have been quick to respond and have begun to provide Japanese complaint versions of their trading platforms. It seems to be clear that global regulators are taking action to regulate this form of financial trading and Malta’s announcement is another step in that direction.
Prior to today’s announcement by Malta’s Financial Services Authority, Binary option providers were able to be regulation as a gaming provider by Malta’s Lottery and Gaming Authority. A number of Binary option providers, including OneTwoTrade took this particular route. However, this announcement sees the end of this arrangement with responsibility being transferred away from the countries gaming authority.
Binary Option brokers will be required to gain a Category 3 Investment Services licence, with all Binary Option brokerages will be subject to the minimum capital requirement of 730,000 Euros as set out under MiFID. Every company licensed in the jurisdiction will be subject on and off-site compliance.
Whether brokerages who sought gaming regulation decide to stay in the jurisdiction remains to be seen, with many brokerages opting for the jurisdiction due to the reduced costs associated with gaining a gaming licence. With the capital requirements set out by MiFID being a major barrier to entry for many binary option firms.
CySEC’s move to regulate Binary options back in 2012 saw a number of firms seeking a CySEC licence. With Malta being the second European jurisdiction to regulate the industry, such a surge in regulatory applications seems unlikely. Whether other European regulators follow suit remains to be seen.