The latest news from the ranks of financial regulation concerns a young company, namely WGM Service Ltd. The financial services company is the parent company of the following brokers: EZTrader, 888.binary, EZinvest and GlobalOption.
The broker EZTrader is particularly well known on the European market, while 888.binary is designed for the Chinese market. In the case of WGM Service Ltd., the regulatory authority CySec (Cyprus Securities and Exchange Commission) decided that it should no longer be able to actively offer its services on the market for a certain period of time, within which all defects should be eliminated. The authority is thereby demonstrating its strict rules, which fall under the European MiFiD guidelines.
Why this decision? The authority lists the following points:
- WGM Services Ltd. does not meet operational requirements for customer deposits
- The equity base is not sufficient to be able to act as an investment company.
- The company carries too high a credit risk.
CySec has not provided any detailed information. The company has 15 days to respond to requirements and comply with the law. Until then, the company is prohibited from offering any services as an investment company. All customer positions must be closed at the customer's request and customer deposits paid out.
The regulation in detail
Many binary options brokers are regulated by CySec. But what does that mean for companies and their customers? As these brokers are based in Cyprus for tax reasons and Cyprus is an EU country, CySec must also implement the European MiFiD guidelines. These are special in the following:
- The separation of customer funds in trust accounts. Customer deposits are managed separately from the company's balance sheet and are not subject to the risk of being used in the event of bankruptcy.
- The guidelines refer to the explicit documentation regarding customer advice in order to be able to understand any inconsistencies.
- The company must have adequate control mechanisms for secure data processing.
- Efficient risk assessment procedures must be used and thus ensure the company's risk-bearing capacity.
- The company must be registered with a regulatory authority in the country, by offering its services in Germany, for example at BaFin.
The CySec regulatory authority is therefore something like the protective hand of customers. Should WGM Services Ltd. the authority can withdraw the license from the company or even impose a large fine.
Broker with a CySec license
By deciding on WGM Services Ltd. the Cypriot supervisory authority has proven its reliability. The European MiFiD guidelines are consistently implemented to protect customers from deposit losses that could be caused by the company.
In our opinion, the following brokers take the regulation of CySec very seriously:
BDSwiss (huge education center and 6 trading types with high yield)
Anyoption (weekend trading, 24/7 support, mobile trading)
OptionFair (trade center, bonuses for new customers, high yield options)
Banc de Binary (many years of experience and competence, account types, large market data and analysis area)
24Option (competition, regulation at CySec, mobile trade)
All these brokers are licensed to CySec and reported to the supervisory authorities in whose country they offer services.
Profit from movements in currency
The licensing of brokers and the decision of the CySec authority resembles the company WGM Services Ltd. brings binary options trading to a higher level of trust for the customer. Although regulation is not 100% protection, it is hardly available anywhere in the financial system.
The strict rules of the MiFiD guidelines, which are constantly being adapted and expanded, have become stricter and more worrying, especially since the financial crisis for companies like WGM Services Ltd. Use risk assessment methods to manage their risk-bearing capacity at a level where customer deposits are at low risk.
Nevertheless, the customer should always keep an eye on whether the broker is registered with the authority in whose country he offers his services, In our opinion, the brokers BDSwiss, Anyoption and 24Option in particular meet the criteria.