The Cyprus Securities and Exchange Commission, commonly known as the CySEC, is the supervisory agency that regulates transferable transaction securities and the operations of the investments market in the Republic of Cyprus.
A Complete Guide to CySEC Regulations
The CySEC was established under the Securities and Exchange Commission (Establishment and Responsibilities) Law. The mission of this supervisory authority is to ensure that investors are protected as they participate in securities trading.
The mandate of the CySEC is to:
· Provide licenses to investment firms, brokerages and other entities in the investment market. The agency is also responsible for taking away a firm’s operating license in case of misconduct.
· Oversee the functions and transactions of the Cyprus Stock Exchange and other players in the investments market within Cyprus.
· Ensure that the agencies under its supervision are complying with the necessary laws.
· Investigate investor reports to ensure that traders are protected and to investigate on behalf of regulatory bodies in other countries.
· Discipline entities that do not comply with the requisite laws.
The Role of CySEC Regulations in the Binary Options Market
The CySEC officially recognized the binary options market in mid-2012. Before this, there were neither laws nor any authoritative agencies that regulated the binary options industry. As a result, numerous fraudulent binary options brokers cheated unsuspecting traders out of their money.
A lot of binary options brokers and financial institutions view Cyprus as a favorable financial center. The country has flexible but relevant banking laws compared to other countries in the European Union and in North America.
Because financial service providers such as binary options brokers are increasingly looking to have their headquarters in Cyprus and since Cyprus has joined the EU, the country now requires all players in the investment market including binary options, to adhere to CySEC regulations.
CySEC Legal Frameworks within the EU
It is true that some providers of binary options trading do not have licensing from CySEC. This does not mean that these providers are outright fraudulent. There are still many pending applications under CySEC evaluation and some legitimate brokers simply have not yet received their license. Even then, traders find those providers who receive a license from CySEC and adhere to the agency’s regulation to be more legitimate.
In addition to legitimizing themselves, brokers who comply with CySEC regulations can operate across the EU.
Cyprus became a member of the EU in 2004. Since then, the country has had to amend its banking and finance laws so they can align to the EU laws and Markets In Financial Industries Directive (MiFIB) regulations.
MiFIB is a set of regulations whose role is to streamline the operations of the financial markets for countries in the EU. As such, the entire EU zone has harmonized laws relating to investment transactions.
The other role of the MiFIB is to provide a protective framework for consumers and boost competition within the securities market in the EU.
Benefits of a Regulated Binary Options Broker
Under MiFIB regulations, binary options brokers are considered to be financial services. This means that once a broker receives licensing from CySEC, they are not only allowed to operate in Cyprus but also to access all the markets in the EU.
When selecting a binary options broker, traders are always advised that one of the most important requirements is to look out for a broker that is CySEC regulated. The benefits of trading with a broker with a CySEC license include:
· Under CySEC regulations, providers of binary options trading are required to place all investors’ monies in a trust account. This means that the money traders deposit on a trading platform are kept separately from the brokers’ company money. As such, investors can rest assured that their money is safe from fraud, theft or the adverse impacts of bankruptcy .
· CySEC regulations require licensed brokers to seek a third party who will watch over their regulations and keep them accountable. This ensures that the brokers are adhering to the requisite laws and regulations. On the other hand, if a broker is not licensed, it is not necessary that they get a third party to oversee their operations.
· According to CySEC requirements, brokers with a license are obliged to exercise the highest level of transparency by letting the public and regulative authorities investigate the brokers’ operations. This is very important because it protects investors from dishonest brokers and it mandates brokers to apply good business practices.
· Lastly, brokers who are regulated by the CySEC are required to offer legitimate assets and to adhere to industry standards for trading binary options. On the contrary, it is common for unregulated brokers to offer non-standards and illegitimate trading assets.
In summary, the mission of CySEC is to protect investors who participate in the investments market and to support growth in the securities industry.
CySEC is in charge of providing operating licenses allowing entities such as binary options brokers to operate from Cyprus and across the EU.
Some binary options brokers have been licensed under the CySEC while others have not. This does not mean that unregulated brokers are necessarily unscrupulous. However, it is safer for investors to trade with platforms that are licensed and regulated under the CySEC framework.
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