Are Binary Options Legal in New Zealand?
Binary options are a new and exciting way of making profitable investments, which is very easy to understand and thus accessible to all, while having a risk level that is relatively low and known from the beginning. In many large countries the world over, for example in the USA, the UK and Australia, hordes of investors enter the thrilling world of online binary options trading, wanting to grab a piece of the action. This increased interest and demand has led to the upspring of a great number of brokers who offer an extensive range of services catering to an array of different trading needs. New Zealand may be a smaller nation, however traders from this jurisdiction are demonstrating a keen interest in the opportunities that the trading of binary options opens up to all.
If you are interested in trading binary options in or from New Zealand, read our dedicated country report below, which amasses all the relevant information available on the subject matter, to enable you ensure that your trading experience will be a successful and profitable one. Knowledge of the market particulars is power and it is key to your future failure or success.
Your first point of consideration prior to deciding to invest in binary options should be whether there are any legal concerns to be aware of. The pertinent financial services authorities in New Zealand have already addressed the legal side of binary options through regulating the field so that consumers can trade with confidence. Therefore, the trading of binary options is considered legal in New Zealand, but also the country’s government policy regards this new trading industry segment as a crucial component of the overall well-being of the financial markets.
Despite New Zealand’s small size as a country, the financial authorities there were swift and decisive in evaluating the dimensions and potential of binary options trading and quickly proceeded to set clear regulations and guidelines for consumers and brokers alike. This forward looking attitude which welcomes binary options trading, provided it abides by the rules, has not been observed in many other, larger countries, which still remain without any specific regulations on this industry segment.
Within its mandate of overseeing all the financial transactions in New Zealand the country’s Financial Markets Authority (FMA) is the regulatory body for the trading of binary options.
The FMA operates in accordance to New Zealand’s Financial Markets Conduct Act, which dictates that any binary option broker wishing to sign up New Zealand traders to their platform must be licensed from the country’s authority beforehand. Brokers need to register under the derivatives category, which includes not only binary options but also various other investment instruments, such as futures. In a wise and proactive move, the FMA has made sure to deliberately keep the definition of the term “derivatives” in the legislation broad enough, to force all brokers wishing to operate in the country to have to register their operation properly, irrespective of the type of service they are offering.
In order to qualify for obtaining a license, interested brokers must comply with a specific set of minimum standards, such as being able to operate effectively as a business, and demonstrating to and convincing the authorities that an applying entity is entirely legitimate and does not in any way pose a threat towards consumers or for the capital markets.
However, the licensing and regulatory process does not end once a license is approved and obtained. It is an on-going procedure, where the FMA dictates several obligations that licensed brokers have to ensure they comply with, to be able to remain in operation and retain their license’s validity. Such on-going obligations pertain, inter alia, to the management of clients’ funds and having accurate and update product disclosure statements in effect.
In recent times, the FMA has proceeded with the tightening of the necessary requirements to be met by brokers in order to obtain and/or maintain their licensing. All brokerage activities are constantly undergoing a close scrutiny, to ensure compliance at all times and ensure a high quality of services offered to clients, at the same time protecting their rights by preventing scammers and fraudulent brokers from establishing business in New Zealand.
The Financial Markets Authority
The Financial Markets Authority (FMA) is the successor of the former entity that was regulating investments in New Zealand until May 20011, which was known as the Securities Commission. In May 2011 it was decided that a new body, the FMA would replace this Commission and that it would ultimately take on a much broader role than its former organization.
The two most prominent entities in the financial markets regulation structure of New Zealand are the FMA and the Reserve Bank of New Zealand which is the overarching authority over the country’s banking sector.
The FMA is the government agency responsible for overseeing all financial regulations within a wide range of markets and sectors that include, inter alia, securities, exchanges, financial advisors, brokers, issuers, and trustees. It is entrusted with the task of regulating all markets and enforcing the requirements of the legislative framework in its domain, while simultaneously protecting the rights of consumers. It its strategy, the FMA pays particular attention to transparency and fairness in the operation of the industry it supervises, because it realizes how important it is to ensure that investors feel confident about the regulatory system in place and trusts it to flag all potential risks and investigate them appropriately.
The FMA strives to make the financial services industry in New Zealand grow on solid foundations and be able to effectively compete on the global market scale, also recognizing that when capital markets operate efficiently, this in turn leads to overall economic prosperity for a country as well as to job creation and the building of wealth. Within this framework the FMA wants to allow consumers to be able to find opportunities to diversify their portfolios, and this is why binary options have taken a prime seat, due to their simplicity and accessibility for traders of all skill, knowledge and experience levels.
Despite being around only for a small number of years, the presence of FMA has resulted in noticeable improvements and benefits for market participants, because the regulator works hard and does its job well. Therefore, the markets in New Zealand have experienced increased levels of compliance, while at the same time there has been a marked improvement in the quality and availability of the resources offered to consumers, thus enhancing their awareness of investments and allowing them to make informed decisions as regards their trading.
Financial Service Providers
Although the Financial Service Providers Act was passed in September 2008, it was not until August 2010 that New Zealand’s Financial Service Provider Register (FSPR) started accepting applications for registration. Moreover, registration was made mandatory for all brokers and entities wishing to provide financial services in the jurisdiction in December 2010.
In a nutshell, the aim of the FSPR is to maintain a complete register of all financial service providers in New Zealand, in order to increase transparency of information. Through the creation of this body, the process of obtaining registration and licensing in one place was streamlined for brokers and other financial service providers as well.
The eligibility criteria set out have been deliberately kept broad and wide in order to encompass all types of service providers, since the only real requirements to be able to apply for registration is having a business address physically located in New Zealand and being in the business of providing financial products. A further protection network added by requires all organizations wishing to register to also pass a criminal record check.
Binary options are still a relatively new segment of the industry and thus the number of truly local brokers operating from and within New Zealand is still limited. However, if they don’t have a problem with the fact that their funds will not remain in their nation, traders could resort to one of the many offshore brokers who cater to the trading needs of New Zealanders.
However, if you do decide to go with an offshore broker, make sure they are legitimate and they are regulated by an offshore regulatory body. Many offshore brokers already operating in New Zealand have licenses from European Union countries, such as the United Kingdom, or Cyprus, which follow rules and procedures similar to those followed by the FMA when it comes to regulation.
Besides the US, in most countries where the trading of binary options is regulated, the available tradable assets come from all four asset categories, namely stocks, currencies, indices, and commodities. If you are about to start trading binary options in New Zealand, it would be useful to know a bit more about these four categories and types:
While stocks are listed on a variety of exchanges across the globe, binary options tradable stocks mainly come from the United States, Europe, Asia, or the Middle East. As each binary options broker offers a different menu of tradable stocks, you should check out what is on offer before you open an account if you are after a particular stock to trade with. Because trading stocks on binary options may be quite tricky for inexperienced traders, it is always better to trade stocks you are familiar with, such as stocks that are inherent to your country.
Due to the existence of the forex trading markets and the fact that most popular currency pairs are traded very widely, there is ample information, readily available and accessible to all traders on such assets, rendering their trading on binary options less complex than the trading of stocks or other asset classes. There are also more exotic currency pairs, which require more specialized knowledge and could bring higher yields.
Almost all binary options platforms will offer listings on the US exchanges, namely the Dow, the S&P500, and NASDAQ, since these are used by most foreign brokers and are easier to follow and learn about. However, depending on the broker you choose to trade with you will gain access to various other exchanges globally as well, including those in Europe, Asia and the Middle East.
Commodities bear a big impact and have a great importance in the economy, regardless of where you are from. Currently, most binary options trading platforms offer trading in a handful of popular commodities, such as gold, oil, silver, sugar, coffee and wheat.
Due to the small size of the country and its economy, New Zealand is highly sensitive and susceptible to even the smallest changes in the fields of agriculture, tourism and the country’s film industry, that could at any time destabilize its entire economy. You must keep this in mind as a local trader and make sure you stay on top of news, developments and information pertaining to the assets you decide to trade.
Binary Options Brokers for New Zealand:
Top Binary Options Brokers For 2016 - BinaryOptionsWire.com
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|General Risk Warning: Trading Binary Options involves significant risk and can result in the loss of all of your investment. As such, Binary options may not be appropriate for all investors.|
The Future of binary options in New Zealand
Since New Zealand already has an established and strong regulatory structure governing the trading of binary options, we do not expect dramatic changes in the regulatory field, besides those updates of the rules necessary to adjust and remain up to pace with the development and evolution of the market itself.
However, it is interesting to point out that New Zealanders who are into trading have been found to have an aggressive trading style and show a strong preference to trading currencies, over other asset types. New Zealand traders also have a reputation for being extremely confident and not afraid of adopting higher risk strategies. Since these trading traits are especially liked by brokers, it is natural to expect that the New Zealand market will attract more brokers setting up shop in the country, while offshore brokers will intensify their targeted efforts to solicit New Zealand clients.