What is the Future of the Binary Options

What is the Future of the Binary Options? – Industry On The Crossroads

The beginning was funny. The Israelis who had got hand in the gambling business and online casinos took the idea of legal exchange traded binary options (BO) and made a primitive retail “moulage” of it since 2009. This simple and brilliant idea was to disguise financial gambling as “real” investments for most players.
They didn’t have to make much efforts: the chance to earn 80% profits over several seconds blew the minds of most people who were not well-informed about the world of real finances. The BO industry‘s exponential growth accelerated since then. Several hundred companies (more than 800 companies at the peak of the growth) offering BO trading were established. 99% of them were lying that BO were the real financial market.
Like with any HYIP (High Yield Investment Program), the popularity of BO rocketed higher. The Israelis earned millions of dollars on their customers’ cash by making cold calls. Cold calling is a practice of making calls by completely strange people who offer exciting “investment” opportunities.
It did work and is still working. People affected as a result of these cold calls lost all their investments, which amounted from $100 to $100,000 and even more. The most powerful marketing campaign, which got hand in online casinos, poker games and sports betting earlier, was launched in the interests of the BO industry.

Reputation That Plumbed The Depths

Few old companies that attempted to work as usual intermediaries in the sphere of financial/binary betting were hit very hard by hundreds of illegal and non-regulated companies, which blew up accounts of their customers as quickly as possible. The reason for such a hurry was that they understood well that they would not stay in the market for long.
The phrase “Binary Options” became synonymous with SCAM in time. Since 2013 regulators based in the leading countries took note of the industry and began to clean the BO market from these illegal companies.
The major step was made by the USA. There are no BO brokers left at all: none of the companies offering BO is permitted to offer its services to US citizens, and all BO are traded on Nadex and Cantor exchanges and supervised by the USA. Those insolent companies, which tried to get money out of US citizens further, were hit with millions of dollars in fines. So, USA and Japan are the most regulated BO markets in the world today.
Other countries began to take measures under the pressure of numerous complaints. Belgium imposed a total ban both on BO and Forex on its territory. Advertising for BO and Forex in any mass media was prohibited in France. Licenses of the companies not regulated by ASIC (Australian Securities and Investments Commission) were revoked in Australia. Israel – a “forefather” of the market – prohibited providing services of BO trading for its citizens, but allowed doing it for citizens of other countries. Cyprus represented by CySEC (Cyprus Securities and Exchange Commission), which gave a shelter to dozens of such companies, started to impose fines right and left and completely stopped issuing new licenses to BO trading companies under the influence of ESMA (European Securities and Markets Authority). The analogous measures were accepted by Malta.

Offshore Companies

Hundreds of Binary Options companies and Forex trading companies were registered in Belize, Saint Vincent, and other tiny tropical states, which don’t provide any legal protection to traders.
The BO market experienced a new upsurge in the number of new companies in 2016. The owners of websites, which promoted BO services, began to receive new offers concerning “a new BO company” registered “under a palm tree” and possessing a box full of bananas as an asset. Such companies couldn’t be distinguished from the hundreds of similar ones.

It’s Too Late

However, these companies came to the Binary Options market too late. They needed to come there in 2012. Now the HYIP is over. As it usually happens in such situations, a sharp surge is followed by the same or sharper decline. It is absolutely true for BO.
As a result, BO companies collapse one after another. Many of the companies, which were once at the top of the BO market, were closed infamously. Their number amounts to dozens now and will amount to hundreds later.
The marketing model, in which BO brokers cheat people who know nothing about financial markets by phone into giving own money under the veil of “investments”, turned out to be unviable over a long time period and failed. The Israelis managed to “eat away” virtually the entire BO market due to their greed and fraudulent activities during several years only.
As a result, the Binary Options brokers either were shut down or began to launch automated customer services systems and discharge thousands of illiterate Israelis who had introduced themselves as “traders”, “providers of signals and profitable robots”, “investment advisors” and other market geniuses. In fact, they were beggarly immigrants living on the percentage earned on their customers’ money and introducing themselves as “bank analysts”.
Such companies have been still operating. These call centers continue their activity in Israeli, Russia, Ukraine, and Moldavia, but their fate is inevitable: they are “eating” the leftovers of once large and sweet “pie” (i.e. an audience of customers).

The Future Of Binary Options

Now, when the HYIP is over, the fun is beginning. Some countries decided to fully erase Binary Options from their legal framework. Great Britain, Australia, Japan, USA, and several other countries secure effective regulation of BO.
The BO’s model itself is undergoing changes. What is the essence of binary options? BO is a mere bet on the market. You can place it in accordance with two schemes: exchange-traded and betting. At that, the exchange-traded scheme is used in the USA only, and the betting one is applied in jurisdictions of all other leading countries. For example, Binary Options are regulated by Gambling Commission in Great Britain and regarded as gambling bets on the market. Although FCA (Financial Conduct Authority), a financial regulator supervising BO, considered the idea of treatment BinaryOption as a financial derivative, they gave it up.
When BO Israeli companies registered in tiny tropical states “eat away” what is left of the “pie”, they will infamously disappear from these island states, because there is no one customer left to cheat. The remaining BO companies will have to radically change their business model. It goes without saying that the overwhelming majority of these companies will either disappear or give up BO as many Forex trading companies do now.
On the contrary, other Binary companies try to develop these models allowing for the mistakes made by their predecessors. They don’t apply cold calling techniques and customize their risk management strategies so that they can act as an intermediary between customers on a platform.
However, it’s not enough. BO will have absolutely new exchange-traded models, in which a BO company plays the role of outside observer and charges a commission for accepting bets on the market placed by traders themselves against other ones, in the future.
Another version – let’s call it a Japanese model – implies the model we can see in Japan. All brokers must obtain a license issued by a local financial regulation body (FFAJ – Financial Futures Association of Japan). The Japanese model of BO looks as follows:
– a complete ban on gambling turbo options, which yield losses to at least 98% of citizens;
– a prohibition of providing any bonuses or signals;
– minimum expiration time starts from 2 hours;
– fixed and predetermined payouts.
Applying these rules everywhere will result in a very interesting effect.

Paradox Of Regulated Binary Brokers

The point is that the major audience of BO represents absolutely illiterate people who don’t understand where 80% profit over 60 seconds comes from and what’s the essence of this business. It was that category of people, which accounts were blown up one after another by BO brokers in bulk. They also “fed” experienced traders who used (and are using) betting BO companies as providers of freebie liquidity with unique conditions never-before-seen in the Forex and other markets.
However, the freebie is coming to an end. CySEC plans to prohibit – and it will prohibit – turbo options, which offer you to earn 60-80% profits in several seconds. You will not see such offers in the real exchange and OTC (over-the-counter) markets, since they are absurd. This model of payouts appeared at the height of the BO industry, when there were a great many venturous people feeling hunger for fast profits and the need to attract even more customers. It is clear that the model will be changed. Some companies have already done it by offering a ridiculous percentage of payouts for turbo options making them absolutely unprofitable; others will come to it under the influence of regulators. Some companies still operating in these island states will not change the business model, because they need customers at any cost; however, the companies will run out of these customers soon.

The paradox is that when, say, exchange-traded BO companies appear in the market, citizens suffered from betting BO companies … are not ready to trade with them. Their tiny mind cannot realize several the simplest concepts. For example:
– if you need to buy something in the real market, somebody must sell it to you;
– if there are no available contracts, you can’t buy anything.
If you trade with a betting Binary broker, prices are quoted by your broker, and you can press the “Above”/”Below” button at any time, since there is no a seller on the other side of the market. If you trade with an exchange broker, a seller must be there; otherwise, a contract will be unavailable. If nobody sells 30 minutes option contract for EURUSD, you can’t buy this option, because it’s not there. Most of those, who traded through betting Binary Options companies, where any contracts are available at any time, are not able to understand the above-mentioned concepts.
For example, Nadex exchange operates based on the same principle as with stock exchanges: some major market-makers create (mainly by trading robots) liquidity available for retail traders and thereby act as if they are mini-brokers.
In case of a regulated broker operating based on the Japanese model people are not ready to agree with the ban on turbo options and the minimum expiration time of 2 hours or more: they got used to press, press, and press the “Above”/”Below” button, since they can earn 60%, 70%, and 80% profits in several seconds.
They are not prepared to trade with the systems, where price is quoted with a market spread, because they don’t understand what a spread is, where it comes from, why it’s used in Forex trading, and why your trade goes into the red by a spread size immediately after you open it.
In other words, it’s all about an absolute financial illiteracy of most people. The BO industry faced a mass unpreparedness of citizens to switch to the market models, which protect their rights. However, they don’t realize it.
This is where the strangest paradox is: after having lost money as a result of betting-based trading people are not ready to switch to regulated and market schemes for the reason that they are unusual and incomprehensible for them.
If this is the case, what things will the future bring for the BO industry then? The answer is a slow transformation. Betting BO companies offering 70-80% profits in 30-60 seconds will die out. They will be striked out from all normal jurisdictions. Afterwards they will move to island states and stay there for some time. However, they will disappear from the BinaryOptions market on their own due to their low popularity (since the binary HYIP is over) and problems with payouts.
Concurrently, prototypes of new BinaryOptions  schemes (based on both old and brand new BO brokers) will appear. These new schemes will implement the US/Japanese BO models, which most of the people are not prepared to switch to. For example, there are about 12,000 active accounts opened based on the Japanese BO models throughout Japan. As for trading turnover, it amounts to hundreds of millions of dollars, since they are traders who deal with large sums of money and have an experience of trading both in OTC (Forex) and stock exchanges.

Binary Options Industry – “Growing-Up”

Binary Options will be growing up as Binary Options audience is growing up. You need to leave off a habit of earning large percents over 60 seconds right now, since the BO scheme is unviable and short-lived, and it will be both banned officially in some jurisdictions and modified by brokers themselves. So that’s what major Forex brokers offering BO trading are doing now.
Business” (if this can be called business) of many BO traders is that they exactly “exploit” large payouts over a few seconds. After having accustomed themselves to the “exploitation” they will be left with nothing, because such offers disappear from the market or be available in exchange-traded version – from 5 minutes (for example, the minimum expiration time is just 5 minutes at NADEX/IG) – with all their specific features, availability of contracts, etc. Be prepared for the fact that you can’t almost double your investments in one minute. The thing is available now, since it is an echo of the past BO feast, when millions of clients came to the market. They went away and the market will be different.
The grown-up market prohibits providing “bonuses”, “signals” or help by a so-called “trader” who is really a 20-year-old boy completed two-week courses. The boy sits in a call center and advises you when you should press the “Above”/”Below” buttons and at the same time chuckles at knuckleheads who can’t understand the absurd things that are happening.
The BO industry has been growing up and will be developing within the US, Japanese and hybrid models. Undoubtedly, this is good news for experienced traders and bad news for newbie traders who are not able to sit even for a few minutes without pressing the “Above”/”Below” button. They will naturally go away from the market, which simply leaves them no alternatives.
The future of the BO industry can be also judged by the market in Great Britain, where a hybrid of the US and the Japanese models is used. The state guarantees any payouts rigorously. Only 3 major Binary Options market operators, which people trade with for many years, are represented in Great Britain. These operators don’t provide signals, bonuses, and advice of managers.
The BO operators act as an intermediary, so these BO models leave traders alone with the market and provide them no help. Nobody will “make money” for you. You will have only your brains and your experience, and your broker will play the role of a silent provider of a trading platform for placing bets on the market.
As these models spread around the world, Binary Options will find their new life and concurrently clean itself from the past bad reputation. However, it depends not only on the BO market operators, but its participants too. The faster newbies grow up, come to their senses, and give up their illusions about fast profits and freebie, the more grown-up, adequate and serious the BO industry itself will become.

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