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Binary options trading

Binary options are a form of bet where you try to predict the outcome of events in financial markets. For example, whether a company's stock price, or a foreign exchange rate, will rise or fall over a defined period (sometimes as short as 60 seconds). 

The use of the word 'binary' refers to the fact that there can only be two outcomes to the bet. If your prediction is right you win the bet; if your prediction is wrong you lose. 

Unlike other forms of gambling, those offering binary options do not have to be licensed by us - they are authorised by the Financial Conduct Authority.

Changes to the regulation of binary options

From 3 January 2018 UK firms offering binary options must be authorised by the FCA. Therefore:

  • these firms will be authorised and supervised by the Financial Conduct Authority
  • binary options will be subject to the regulatory regime for investment products
  • individual complaints can be referred to the Financial Ombudsman Service
  • eligible consumers will have access to the Financial Services Compensation Scheme

However, those protections will not compensate you for any losses from trading. You should still be careful and consider whether the products are right for you.

The risk from unlicensed operators

There is a risk that arrangements which resemble binary options betting or other financial investments could be scams. Look out for the following warning signs:

If something sounds too good to be true, it probably is

Be suspicious of ‘too good to be true’ schemes, such as promises of unrealistic returns on an investment. There are no guaranteed get-rich quick schemes.

Beware of cold-calling

If you have not requested contact you should not give them any personal information. Do not agree to any deals immediately and insist on time to obtain independent/legal advice before making a decision.

Beware false claims about who regulates an operator

Businesses offering binary options that have remote gambling equipment in Great Britain need to be licensed by us and are required to display this on their website. To check whether a company holds an operating licence search the licence register on our website. 

Businesses that are not regulated by us may be licensed in other reputable jurisdictions, most of whom will have similar online registers. You should check before registering an account.

If the company is unlicensed, consider carefully whether to use them

An unlicensed company may be acting illegally. They will not be required to abide by any code of conduct and there is no incentive for them to deal fairly with you. 

It is easier for unlicensed companies to use false names, addresses and contact numbers and to disappear with your money. 

Also keep in mind that, just because a business is registered with Companies House, this does not necessarily mean the business itself is operating legally. 

Companies House is not regulator and does not verify the legitimacy of company operations. 

If you lose money the Gambling Commission cannot recover it for you or compensate you. 

If you think you have lost money after using an illegal, unlicensed operator, it is recommended that you contact Action Fraud, either through their website or on 0300 123 2040.