Overview of Malta’s New Binary Options PoliciesBy Annie Reona | Monday, July 27th, 2015
The Malta Financial Services Authority (MFSA) has recently put out a circulation on the policies they have for binary options traders and their licenses. The policies have been put into place to increase existing safeguards because of the complexity of binary options and the high risks that come with them. This means that those who wish to be licensed binary traders will have to be under the standard rules of those with Investment Services Licenses as well as additional regulations.
The license required for individuals who wish to offer binary trading options services to their clients must have a Category 3 Investment Services License. This will allow an individual to provide all investment services, to hold onto money from clients, and to deal using their own personal account. Applicants for the license are more likely to be granted with it if they are well-established in the investment industry, have proven to be adept at working with clients to resolve problems, and are prepared to adhere to all of the additional regulations.
Additionally, the restrictive requirements that were previously placed on individuals applying for this license has been loosened slightly. Previously, an individual applying for this type of license was also required to have a qualifying shareholding by a licensed entity that was also in the same investment industry. Now, this has changed to allow each case to be considered individually so that if someone was not previously licensed, it is possible for them to get the license to offer binary options without needing to have connections to an established business.
The qualifications that apply specifically to the Board of Directors and other employees are simply that the senior manager, the risk manager, and those who are in senior positions are collectively experienced in trading binary options. MFSA is also requiring the risk manager position to be a full-time position occupied by a member who is locally based in Malta, regardless of the size of the company. In terms of records, all companies are required to access and control all of the transactional data they are involved in and maintain all records of such transactions in their entirety.
Companies that have developed their own trading platform should be sure that it has either been certified by a qualified independent IT auditor or that it has a solid track record on the market. However, MFSA does prefer those businesses that are using trading platforms which are already in use within the industry that have existing track records for success.
The additional rules and regulations that companies are expected to adopt include providing relevant warnings to potential and current clients about the risky nature of binary options, providing training demonstrations and tutorials to clients, placing trades online, and limiting the risk of trades as much as possible. Part of the expectation involving the limiting of risks is to highlight certain trading dangers to clients including large quantities of trades being done in a short time and accumulating losses.Published in News & Analysis