Option Regulation
Seventieth session of Forex Training
Welcome back to Forex professional training in financial markets.
In this session we will talk about Option regulation.
Option Regulation
Regulated financial market providers are guaranteed to hold the client’s fund in a trusted account with protocols to develop transparency, safety, equity in addition to diminishing trading abuse, fraud and manipulation.
Their operation and services are monitored and assessed by government financial bureau on the basis of their monetary legislation.
Regulated financial market makers and providers have higher quality of services in comparison to non-regulated providers.
Considering that each territory has a unique tradition and regulation, providing market services in some countries may require supplementary articles and clauses.
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Some (Private or Governmental) regulatory organization are as follows:
SEC: Securities and Exchange Commission – USA
FINRA: Financial Industry Regulatory Authority – USA
CFTC: Commodity Futures Trading Commission – USA
NFA: National Futures Association – USA
CySEC: Cyprus Securities and Exchange Commission – Cyprus
MFSA: Malta Financial Services Authority – Malta
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JFSA: Japan Financial Services Authority – Japan
FCA: Financial Conduct Authority – United Kingdom
BaFin: Federal Financial Supervisory Authority – Germany
CNMV: Comisión Nacional del Mercado de Valores – Spain
FMA: Financial Management Association – Australia
AFM: Autoriteit Financiële Markten (Authority for the Financial Markets) – Netherlands
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FINMA: Swiss Financial Market Supervisory Authority – Switzerland
MAS: Monetary Authority of Singapore – Singapore
AMF: Autorité des Marchés Financiers – France
Option in Europe and Asia
Option is a recent phenomenon comparing to Foreign Exchange and Stock market.
Options as a newcomer of fiscal market can be regulated by JFSA, MFSA or CySEC (the first Europe MiFID-member that represents regulation for Option provider from 2012) in all countries except the USA.
The minimum capital requirement for Option regulation is around 1,000,000 Euro which recently increased for more security, somehow equal to Forex broker minimum capital requirement.
The necessity of regulation and governmental monitoring on Option providers, that have proliferated numerously, grows rapidly.
There are around 330 companies which provide Option to their clients around the globe.
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Option in the USA
The USA has one of the strictest regulations which have specified expiration time, strike price, short selling rules, number of hedged positions, lot size, position holding limits, trading unit, leverage or margin limits are determined.
Entire Option trades are monitored by a couple of regulatory organisation such as SEC, FINRA, CFTC and NFA.
For instance Bank de Bin, a CySEC regulated Cyprus-based company, was charged by CFTC due to the illegal sell of Options to the US investors.
Halal and Islamic sentence (Fatwa)
Middle Eastern countries consider HALAL sentence from religious leaders as regulation.
Recently, trading in Option providers was announced as HALAL in Islamic regions and countries as a result of diversity between Gambling and Option trading function.
Gambling and Lottery providers are regulated by the gambling regulators such as IAGR, while Option providers are regulated by investment and financial service organizations and government financial bureau.
That concludes this session, take care.