As you search online for binary options, you will find many offerings. Some are regulated, but many are not regulated. The Commodity Futures Trading Commission (CFTC) is a US government agency that oversees the regulation of futures, options and swaps trading on regulated U.S. exchanges. Along with the Securities and Exchange Commission (SEC), the CFTC oversees the binary options listed on registered exchanges or traded on a designated contract market.
A visit to the CFTC’s website, explains what binary options are and how they are traded as well as giving fraud advisories. Currently, they are cautioning about fraudulent schemes involving refusal “to credit customer accounts, denying fund reimbursement, identity theft, and manipulation of software to generate losing trades.”
The CFTC also warns of trading platforms that may be operating in violation of applicable laws and regulations. The number of Internet-based trading platforms that offer the opportunity to purchase and trade binary options has surged in recent years. The increase in the number of these platforms has resulted in an increase in the number of complaints about fraudulent promotion schemes involving binary options trading platforms. Some are operating as unregistered broker-dealers or unregistered securities exchanges.
Under the heading of “Certain Registration and Regulatory Requirements of the CFTC”, there is a bold-faced warning to potential investors. It reads. “Because of their lack of compliance with applicable laws, if you purchase binary options offered by persons or entities that are not registered with or subject to the oversight of a U.S. regulator, you may not have the full benefit of the safeguards of the federal securities and commodities laws that have been put in place to protect investors, as some safeguards and remedies are available only in the context of registered offerings. In addition, individual investors may not be able to pursue, on their own, some remedies that are available for unregistered offerings.”
According to the CFTC website, “There are currently only three designated contract markets offering binary options in the U.S.: Cantor Exchange LP; Chicago Mercantile Exchange, Inc.; and the North American Derivatives Exchange, Inc. All other entities offering binary options that are commodity options transactions are doing so illegally.”
As you can see, trading with the North American Derivatives Exchange, Inc. (Nadex) is a designated contract market. It is regulated by the CFTC. It is important to use a regulated exchange when you are trading so that you have the full benefit of the safeguards that have been put in place to protect investors.
As suggested by the CFTC, do not invest in something you do not understand. There are other links available on the website for you to use to research any platform you are considering for your trading. Make sure the trading platform you are using is registered.