Aussies, take your finances into your own hands

More and more Australian citizens are taking to financial instruments in order to earn themselves a little extra income, or as an alternative to normal, remunerated employment.

The advent of the internet has opened up a world of possibilities to Australian-based wannabe traders. There are numerous brokers available on the internet at which citizens have the opportunity to trade in assets, commodities, currencies (also known as foreign exchanges or forex) and binary options.

Of those possibilities, binary options is considered the easiest to understand for the layman trader. There can only be two results following the completion of a binary options trade – win or lose. You ‘bet’ on the value of something (typically a currency) rising or falling within a specific timeframe. If you win, you receive back double what you risked, less your broker’s commission. If you lose, you lose your ‘stake’.

There is a complexity with binary options trading though, and that comes via the involvement of the Australian Securities and Investment Commission (ASIC).

ASIC does not seem to like binary options trading …

… and here’s why. In Europe and a few other parts of the world, binary options trading is regarded as gambling. In many European jurisdictions gambling is free from taxation.

In Australia it’s a very different case. Capital Gains Tax (CGT) is payable on profits from market investments, and this includes trading in binary options.

ASIC are finding binary options brokers very bothersome to police. That’s because the majority of binary options brokers (the company with whom a trader places their trades) are offshore. Most of them operate via Europe and Asia – Cyprus and Israel are particular binary options hotbeds.

ASIC’s initial solution was to ban trading in binary options outright. However, that ban has since been relaxed – it is now legal to trade in binary options as long as it is done at an ASIC-approved broker.

ASIC is tough on brokers and affiliates that break the rules

Not only is it illegal for a non-licensed broker to provide binary options trading services to Australian citizens, it’s also illegal for such brokers to even advertise their services to Australians. This illegality even stretches as far as affiliates – companies that act as marketing agents for brokers.

ASIC does not take the flaunting of its rules too kindly. In July 2016 ASIC handed out notices to forty binary options brokers that had engaged in unregulated activities. This crackdown also extended to binary options broker affiliates sites, forex brokers and CFDs brokers.

Of the brokers that were contacted, twenty-one expressed a willingness to obtain an ASIC licence. It was not just small brokers that were ‘banned’ from offering services to Australian citizens. One of the largest brokers available on the internet – Banc De Binary – was placed on the ‘do not do business with this company’ watchlist, and remains there.

How Australian traders can make certain they are legitimate

ASIC is not only concerned about making sure traders are paying all the tax they are liable for. They are also there to protect traders from one of the biggest issues facing those wishing to trade in binary options – bogus brokers.

There are daily reports of yet another broker being unveiled as a scam artist, and traders are losing thousands of dollars to bogus brokers every day. Unscrupulous brokers ask for a small investment when a trader signs up with them, then convinces the trader to invest more once their initial trading starts paying dividends. That’s when the contact stops, and the trader’s requests to withdraw their money are ignored.

Only genuine binary options brokers are awarded ASIC licences. If you are an Australian citizen who wishes to partake in binary options trading, then the first important step is to make you use only a ASIC-licensed broker. Any such broker should display their licensing at the bottom of the landing page of their site, or you can contact them or ASIC to check that they have the appropriate licences in place.