Let me guess – you have a few questions.
- Are binary options trading legal in the UK?
- What are the best brokers available to UK customers?
- What does licensing and regulation mean for you, the consumer?
- Who handles licensing and regulation?
I aim to answer those questions – and more – below.
Who are the Top 5 UK Binary Options Brokers?
First off – it is 100% legal to trade binary options here. And, from what I understand, you don’t have to pay taxes on your earnings.
Note: That point about taxes may have changed when binary options were no longer considered gaming. You should chat with a lawyer/accountant if you have any tax related questions anyway.
And if that’s not enough good news, then get this –
Most, if not all the brokers we recommend to UK traders are licensed and regulated, either in the UK or nearby Cyprus.
Can it get any better?
It can – the following are our top picks for best UK broker:
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The best way to find a broker who’ll be a good fit is to have an idea of what you want – features, assets, promotions, software features, etc. Then read our reviews to find the brokers that best match those criteria.
Now let’s look at who handles the regulation for UK-focused brokers.
UK Licensing and Regulation Authorities, Committees and Agencies
Earlier I noted that binary options were considered gambling. In fact, until the end of 2014 binary options fell under the Gambling Act of 2005.
But then the bigwigs of the gambling and lottery commissions decided to change how things were done. Binary options are now the responsibility of the FCA.
The FCA – or Financial Conduct Authority – is in charge of developing new regulations and guidelines to be followed by all brokers in the UK. They also police the financial activities of the city and banking system.
They have the power to:
- Regulate conduct related to marketing of financial products. This means less hype and outrageous claims.
- Set minimum standards and to place requirements on products. This means higher quality products for the consumer.
- Investigate organizations and individuals for trustworthiness and transparency.
- Ban products up to one year while considering an indefinite ban. This means it’s less likely you’ll buy a bad product.
- To instruct firms to retract or modify promotions they think are misleading.
The general idea is to protect you and me from bad guys. But they’re only one-third of the binary options superhero squad.
Another third belongs to the Financial Policy Committee’s (FPC). Their job is to make sure all licensed brokers follow the rules and regulations set by the FCA. They’re also responsible for monitoring the economy and focusing on issues that threaten long term financial stability.
And last, the Prudential Regulation Authority (PRA).
The PRA is responsible for regulating and supervising banks, credit unions, insurers and major investment firms. They have two main objectives – to promote the safety and soundness of firms and to secure an appropriate degree of protection for policyholders.
Now, there aren’t a TON of brokers licensed, regulated and overseen by these guys. But there are a few, which include:
- GFT UK Limited
- Banc De Binary
If a broker isn’t licensed and regulated by the FCA, FPC and PRA, then chances are they are overseen by the Cyprus Securities and Exchange Commission (CySEC). This means they follow the rules set by the Markets in Financial Instruments Directive (MiFiD).
Why Regulated Brokers are Important
All this talk about regulation and licensing – why are these thing important?
It matters because:
==> Brokers will have standards they have to meet to operate in the UK. That can include not doing business in countries that deem binary options illegal. It can mean they have to have a UK-based office. It could also mean having adequate resources to do business in the country. It can mean having all the above.
==> They will need to have separate accounts for customer funds. This does a couple things – it makes sure the company has money to operate (they’re not just accepting deposits and are all of a sudden ‘in business’). And two, it makes sure your money is always safe.
==> There are consequences if a licensed and regulated broker screws traders over. It may also mean having legal options for getting your money back if it’s stolen.
The bottom line – regulation and licensing exist to protect consumers. To protect you.
And that’s something we can get all get behind.