Technical Aspects of the EU MiFID Regulation
The Markets in Financial Instruments Directive (MiFID), is a European Union law that provides harmonized regulation for investment services across the 30 member states of the European Economic Area (the 27 Member States of the European Union plus Iceland, Norway and Liechtenstein). The main objective of the Directive was to increase competition and consumer protection in investment services.
MiFID, which has been in effect from 1 November 2007, has been the cornerstone of the European Commission’s Financial Services Action Plan whose measures significantly changed the way EU financial services markets operated. The Directive contains measures that changed and improved the organization and functioning of investment firms, facilitating cross border trading while creating strategic opportunities.
The Cyprus Securities and Exchange Commission (CySEC) monitors binary option brokers compliance with MiFID.
Why Cyprus, Not United Kingdom, Germany or France?
The question that often arises with binary option traders is why is the broker registered and regulated in Cyprus. Why is the broker not regulated in the United Kingdom, Germany, or another EU country. The binary option industry is a very young industry. The 27 member states of the EU each have their own financial regulator.
Cyprus was the only financial regulator to come up with rules and regulations for binary option brokers. Cyprus is in essence leading the way for binary option broker regulations. Cyprus is a small country and saw the opportunity to be a trend setter and they announced that they will create the legislation to regulate brokers.
Other Countries Regulating Binary Option Brokers
Some brokers, after receiving a license to be regulated in Cyprus, will register with various country like the UK or Germany. Regulated Brokers like TopOption and 24Option, have taken their Cyprus license and registered with BaFIN, Banc de France, or FCA in UK. All this does is create an added point of registration. A company does not have to register with more than one EU regulator to do business in all EU states.
It is always important to check that the binary option broker has a license and that the license is still active.
Our most recent list of CySEC regulator brokers can be found here.