The industry is becoming more competitive, regulations are becoming stricter, and acquisition costs are increasing. Brokers are constantly looking for ways to cope with these changes and manage their businesses to succeed in a market that promises to be quite different in just a few years.
The changes are far from over and brokers who fail to have a global vision to take the necessary measures will be forced to leave the market.
What is happening with binary options and foreign exchange markets in the EU?
In recent months, there have been impactful regulatory changes across the European Union and in particular for CySEC, a hub for many binary options and Forex brokers.
We have seen changes affecting the financial sector across the board, establishing new guidelines and imposing stricter enforcement on forex brokers , liquidity providers, call centers and portfolio managers. Forex brokers faced heavy fines of several hundred thousand euros.
Rules for operating call centers have become stricter. Regulatory bodies around the world are systematically targeting binary options brokers who are finding it more difficult to maintain a competitive advantage and grow.
The entire industry landscape will change dramatically.
What about the binary options market in the United States?
The United States has banned binary options brokers within its borders, however, some companies continue to operate outside the confines of the law.
In recent weeks, rumors about investigations being opened by the SEC have started to circulate. A few years ago, the gaming industry experienced the same problems, in an attempt to crack down on internet gaming, American authorities arrested the executives of several gaming companies.
How will financial market trading evolve?
Unregulated brokers will leave the market, as they will find it increasingly difficult to gain the trust of new clients and to deal with regulators.
We have seen, and will continue to see, broker consolidation. There will be fewer of them and the biggest will dominate the market.
In order to hedge their risks, binary options brokers will begin to explore the possibility of expanding or completely changing their forex business models. Brokers could use their call centers, marketing services, suppliers, and add a suite of products to target a new type of investor interested in forex
Binary options brokers will be forced to change the way they operate and will soon have to stop operating with a market maker license.
According to the latest consultation document published by CySEC, call centers will be necessary to operate within the EU and it will be necessary to maintain €1,000,000 of equity as collateral. This new directive will impact binary options and forex brokers, as some will not be able to cope with these requirements.
For brokerages that decide to operate from outside the EU, technology providers will be able to help them offset the added expense by reducing their operating costs with automation tools. Stable and efficient automation tools that help in the conversion and retention process help increase the C&R rate, but also reduce sales staff.
Technology providers are increasingly being warned to avoid providing their services to unregulated brokers, especially those operating in the United States without a license.
Technology providers will adapt their product line to serve brokers who are changing their business models from binary options to FX.
These changes are just the tip of the iceberg, there will be more over the coming weeks/months.