Option Regulation - Leverage, Hedge and Margin Limitations

Option Regulation

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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.

Binary Option Regulation - Monetary Legislation, Financial Transparency and Market Manipulation

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

Binary Option Regulation - SEC FINRA CFTC, Securities and Exchange Commission - United States

NFA: National Futures Association – USA

CySEC: Cyprus Securities and Exchange Commission – Cyprus

MFSA: Malta Financial Services Authority – Malta

Binary Option Regulation - NFA CySEC MIFSA - Cyprus Securities and Exchange Commission

JFSA: Japan Financial Services Authority – Japan

FCA: Financial Conduct Authority – United Kingdom

BaFin: Federal Financial Supervisory Authority – Germany

Binary Option Regulation - JFSA FCA BaFIN - Financial Conduct Authority - United Kingdom

CNMV: Comisión Nacional del Mercado de Valores – Spain

FMA: Financial Management Association – Australia

AFM: Autoriteit Financiële Markten (Authority for the Financial Markets) – Netherlands

Binary Option Regulation - CNMV FMA AFM - Financial Management Association – Australia

FINMA: Swiss Financial Market Supervisory Authority – Switzerland

MAS: Monetary Authority of Singapore – Singapore

AMF: Autorité des Marchés Financiers – France

Binary Option Regulation - FINMA MAS AMF - Swiss Financial Market Supervisory Authority – Switzerland

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.

Binary Option Regulation - MiFID Minimum Capital Requirement for Forex Brokers Binary Options

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, a CySEC regulated Cyprus-based company, was charged by CFTC due to the illegal sell of Options to the US investors.

Binary Option Regulation - Lot Size, Margin, Hedged Trades and Leverage Limitations

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.

Linkages & Notices

You can also view the video of this session available on the PFOREX Financial Video tutorials.

You can also find the video of this session on PFOREX YouTube Channel.

PFOREX Assist app provides BEST & FREE trading signals and market analysis. PFOREX Assist is available on App Store (iOS version) & Play Store (Android version).

The PDF file of this session is also available.


PFOREX Educational materials in text and video formats are developed by PFOREX Department of Education to enhance and improve investors’ knowledge and trading skills. Due to high risks and volatile fluctuations in financial markets, traders and investors must develop their trading skills and knowledge. It is strongly recommended to apply Risk and Capital Management when trading in financial market.

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