The Commodities Futures Trading Commission (CFTC) has added 71 names to its Registration Deficient List, described by the Commission as a “list of foreign entities that have been identified as acting in a capacity that appears to require registration but are not appropriately registered with the commission”, and commonly known as the Red List.
Currently comprising more than 110 entities, the Red List was originally established by the CFTC to help US consumers make well-informed decisions about the type of entities they choose to trade with. While making it clear that registration is no guarantee against fraud or other unscrupulous behaviour, the CFTC points out that a registered entity is much more likely to protect the consumer’s funds.
The Trouble with Binaries
Unregistered, unregulated, unscrupulous binary options brokers are one of the key reasons for the Red List’s existence. Binary option trading is highly controversial and incredibly simple – just a matter of predicting whether the price of an underlying asset will be higher or lower than its strike price on a certain date. Dismissed by many as little more than betting on the toss of a coin, the simplicity makes binary options very popular – not least with novice traders.
Nadex and Cantor
The North American Derivative Exchange (NADEX) and Cantor Exchange are the only registered and CFTC-regulated binary options exchanges in the US. As such, they offer a degree of trading security, though not necessarily against bad trades.
Trading binary options with “off-exchange”, unregistered, unregulated brokers, such as those on the Red List, entails trading with entities on the other side of the trade, many of whom make outlandish claims about guaranteed returns and low-risk strategies. As binary options are all-or-nothing bets, any talk of a “binary-option strategy” should instantly arouse suspicion.
Binary option fraud is a global phenomenon. A recent series of articles in the Times of Israel online newspaper describes how boiler room operations with high pressure tactics and similarly outlandish claims have spread in that country.
A Job for the FBI
In February 2017, the website broke the news that the FBI was conducting a worldwide investigation into binary options fraud.
The Bureau’s Supervisory Special Agent Milan Kosanovich told the paper “We are not limited to the USA. We have international partnerships with countries all over the world. I can’t get into specifics but we have worked long and hard as an entity to make sure we developed those relationships and get the information that our investigators need from our partners.”
French and English Options
Sapin II, France’s sweeping anti-corruption law, prohibits almost all advertising of binary options within the country.
In July 2016, binary options in England – currently regulated by the UK’s Gambling Commission – took the first steps towards regulation by the country’s Finance Conduct Authority.