Brexit Effects On Binary Options Industry I Latest Binary Trading News

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How will Binary Options be Affected by Brexit?

Brexit has been the main topic on everyone’s mind for the past nine months. Not only will the separation from EU affect the United Kingdom but it will probably have worldwide effects, with the focus on the European Union and its citizens. The UK triggered the Article 50 for official divorce negotiations which will include all possible societal categories; from migrations, healthcare, education to financial market and specifically binary options trading across Europe.

According to the British Prime Minister Theresa May, the UK willfully acknowledges and accepts inevitable consequences of the UK leaving the European Union. One of those consequences is certainly the trading agreement which will now elicit big changes in the European market.

The question on everyone’s mind is not will Brexit have any effect on binary options trading, but rather when will those consequences be visible, what exactly are they and how intense are the effects going to be. As things stand at the present moment, there is no possible way to accurately predict all those changes but there are certainly multiple indicators involving the currency status, market fluctuations, and others, that can begin to tell the story.

Will Binary Options Stay Unaffected?

United Kingdom is definitely going out from the EU and this decision won’t leave binary industry unaffected. We all know that the UK is a very big player in the financial world and they are also one of the most important assets in EU.

Now when we know the final result, we can only adapt and stay informed about the market news and financial events that are currently going on. In a very short period, Brexit referendum has caused a lot of instability in financial market and traders have and will experience a lot of changes, not only with Pound.

There is also a possibility that FCA regulator changes their interests and that trading binary options become a bit different than it was before.

What Opportunities will Traders have after Brexit?

According to financial specialists, recovery for British pound is almost not possible in the near future. After Brexit has become a reality following a referendum in June 2020, the value of the British pound has started to fall down. Regarding this, market industry indicates that traders have become too bearish towards British Pound.

GBPEUR Becomes Attractive Pair

The option for profiting in binary options is to trade with GBP and EUR so basically, traders will mostly trade for this currency pair. The benefit of trading with binary options during this time is that traders can take big advantage of fluctuating market because traders are placing trades on the price movement of certain assets. This way, traders can capitalize their profits by taking the advantage of the market volatility.

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GBPUSD Opportunity

Traders who mostly trade on currency pairs can focus on trading with GBPUSD pair since there is a big possibility for Pound to fall against the dollar. Using the most important technical indicators like Fibonacci, Elliot Wave or Moving Averages will bring the most use out of this strategy.

Collateral Damage of Brexit on the FX/CFD/Binary Options Industry

There is no precedent for the current situation, but reasonable cross border frameworks seem most likely.

This article was written by Ron Finberg, BD at Cappitech.

With the UK heading out of the EU, a lot of the immediate attention has been rightfully focused on the Brexit referendum’s effects on the financial markets and 30 year lows for the British pound. But, beyond the current volatility in stocks and currencies, the online trading industry for both the EU and UK have plenty of regulatory issues that they will have to digest.

Article 50

First things first, despite the vote to leave, all current EU laws and financial regulation that the UK abides by continues to be in effect. As a member state of the EU, as per Article 50 of the Lisbon Treaty, the UK is required to submit a formal notification to the European Council of its intention to withdraw.

That will then put into effect a two-year period for the UK to create a withdrawal framework, including new trade treaties with remaining EU countries.

There has been speculation that the official withdrawal notification won’t take place until October, due to first putting in place government officials to handle the process. Even if a decision was made today to formally submit a withdrawal notification, the UK is still in the EU for a two-year transition period.

Cross-border regulation

Where things get murky is what happens next. A major consideration of current EU financial regulation is the uniformity of rules and cross-border agreement of policies. As a result, there is free movement of marketing of financial products across the EU.

For example, mutual funds set up under the UCITS structure and domiciled in the UK can solicit clients across the EU. In the online trading industry, the cross-border passporting of licenses allows brokers with Cypriot based CySEC regulation to onboard customers from the EU and vice-versa. (Brokers still need to abide by specific country by country laws such as Belgium’s limit on bitcoin related CFD trading or the UK’s requirement that financial firms have an investment advisory license for copy trading)

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Without having put into place new treaties to govern passporting of licenses, a British broker with regulation from the UK’s FCA will no longer be able to accept clients from the EU once the complete Brexit withdrawal takes place. Similarly, EU licensed firms will have difficulties accepting clients from the UK.

Most likely though, due to the existing trade taking place, it isn’t in anyone’s best interest that huge fences regarding passporting appear. As such, we can expect some sort of compromise trade agreements to take place as the UK will probably continue to use much of the financial frameworks in use across the EU.

EMIR and MiFID I & II

The expectation of a compromise structure is due in part to recently initiated and upcoming regulation set to take place in the EU. Among them are EMIR regulations and MiFID that are already in effect and MiFID II which is set to start in 2020.

The initiation of EMIR and MiFID set transaction reporting requirements in the EU for equity and derivatives trades. When MiFID II goes into effect it will apply requirements around best execution reporting and real time monitoring of trades.

As the reporting rules include execution and counterparty reporting, non-compliance with portions of this regulation may cause brokers and banks to have difficulties accessing EU based liquidity pools and exchanges.

In addition, the UK has had input around many of these laws and specifically the Bank of England has been a leader of publishing opinions around best execution analysis. As such, expectations are that any new UK financial rules will include transactional reporting regimes similar to those they have already been on the path to implement and which are needed to trade pan-European exchanges.

(One wild card is EMIR regulation which governs derivative reporting. As much as it hurts me to state this due to my firm Cappitech, providing a solution for brokers to automate their EMIR reporting, there is a good chance the UK will decide to get rid of double-sided reporting and use a simpler single-sided framework that resembles programs put in place in the US and Australia. Such a decision would greatly limit the amount of firms that need to comply with EMIR, although forex/CFD/binary options would probably still need to report).

The bottom line is that there is no precedent for how the Brexit will play out, but current regulatory inertia points to reasonable cross border frameworks between the EU and UK being put in place.

Forex Trading in the UK stays under ESMA’s restrictions until Brexit

March 1, 2020, | AtoZ Markets – The UK Financial Conduct Authority (FCA) posted a statement on its website concerning the onshoring of the European Securities and Markets Authority’s (ESMA) temporary binary options prohibitions and difference products (CFDs) restrictions.

ESMA restrictions remains part of the UK law for now

The British financial authority reported that the aforementioned measures initiated by ESMA will remain part of the UK domestic law on the day of Brexit as part of the EU (Withdrawal) Act. The British firms, as the FCA statement outlined, are required to comply with ESMA measures until their expiration in April 2020.

FCA is getting reading for different Brexit scenarios

The regulator continues to prepare for a number of UK withdrawal from EU scenarios. This includes an agreement under which the UK leaves the EU on March 29, 2020, without concluding an exit agreement and an implementation period between the UK and EU governments. The ESMA decision notes that the resumption of a temporary restriction on marketing, distributing or selling CFD to retail customers and a temporary ban on the sale, distribution or sale of binary options to retail customers will become part of UK law if the EU law ceases to apply in the UK on March 29, 2020. Therefore, firms are required to comply with ESMA notifications of decisions before their expiration date of April 1, 2020, for binary options and April 30, 2020, for CFDs. The FCA oversight of firms in this sector will continue to focus on adhering to the ESMA interim intervention measures.

UK financial authority announced about its plans a year ago

In December 2020, the FCA published two consultative documents (CPs) to make permanent ESMA intervention measures in the UK permanent. The proposed FCA interventions are essentially the same as those of the ESMA, although the UK regulator also suggests applying its rules to products that can be replaced. FCA plans to decide on the final rules in order to be able to publish the Policy Statement and any final Handbook rules in March 2020 for binary options and in April 2020 for CFD and CFD-like options. FCA expects its final rules to be applied shortly after publication to coincide with the expiration dates of the ESMA restrictions.

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