The Important Details behind Malta’s New Binary Options Regulation

By Lex Yaranu | Thursday, July 30th, 2015

Those eMalta developmentsngaged in binary options trading are watching with interest the developments with Malta’s new regulation. The binary options trading license issued within the MiFID framework affect the ability of traders, unless the binary options is accepted and permitted in the particular EU Member State. The changes in Malta’s policy could impact how others in framework will approach this type of trading.

Earlier this month the MFSA published policies relating to the licensing of binary options trading operators. Additional polices were put in place to buff up safeguards due to the complex nature of binary options trading, and the potential for risk on the part of investors. According to these new polices it will be necessary to apply for a Category 3 Investment Services License. This new license will give the holder the ability to provide this type of investment service and to hold the clients’ money toward the investment. Those with this license with also be able to invest on for their interests.

Other the new MFSA rules requiring promoters applying for the license to have an established business in the industry, and previous experience working in a regulated environment with few customer complaints there is little to hold back the typical binary trader provider from applying for the license. The biggest difference is that the capital requirement is now EUR 730,000, and the MFSA may also increase this requirement as due to the higher scale and volume that’s expected.

Insiders in the industry are more concerned with the loose definition of binary options being used by the MFSA. As there is no real uniform definition of this type of trade the agency will look into the how the provider advise the client rather than whether the client or provider refer to the trade as a binary option. This could level the need for licensing against those who do not typically refer to their trade as binary options, or in situations when there is a one time “win or loss” aspect to a trade.

There was a change in the policy that would have required all applicants to have a qualifying shareholding licensed entity also offering binary options. MFSA now states it will look at these situations on a case by case basis.

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One Comment

  1. In my opinion this licensing is a bit vague and very “open to interpretations”. Time will see how it works.

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