An increasing number of national online trading regulators have the past few months expressed their opinion that forex and binary options signals should be regulated under fixed rules and laws.
At this moment signal or copy trading is completely unregulated in most jurisdictions around the globe. However, the larger and more popular this business becomes, more and more national regulators believe that it should come under authorities’ scrutiny.
Signal trading allows traders to sign up under so-called account managers who will then either execute trades on behalf of the signed up traders or provide traders with instructions – so-called signals – that traders will have to follow.
This form of online trading became first popular in the Forex business. Later on it was also adopted and implemented by various binary options trading service providers. However, signal trading is still more popular when it comes to traditional forex trading.
The account managers will earn either a commission on the profits made by traders or cash in a fee that was required to be paid by traders in advance. While this industry seems to have become very profitable, many business experts believe that the lack of regulatory oversight could potentially result in fraudulent account-managers tricking people into executing unprofitable trades in order to scam people off of their money.
As such, according to regulators in countries such as the United Kingdom, Japan and the United States, the only solution to prevent this is to regulate signal trading. This would result in clear rules being established regarding who would be able to offer signal-trading services and who would be able to become an account manager.
Signal trading service providers would then also be required to apply for official licenses issued by government agencies such as the UK FCA as well as the CFTC in the United States. Companies that won’t follow these rules would be legally prosecuted.
While most experts agree that regulation is definitely necessary, they also urge national regulators to harmonize their new regulations in other countries. If too many countries implement distinctly different regulations and rules, then companies and service providers would have a very hard time in satisfying all of the different requirements.
Experts also believe that new regulations will most likely not be implemented in any country during the next 6 to 12 months, however they are sure that regulation will definitely happen sometime in the future. As such, signal service providers are recommended to prepare for the future necessity of applying for various licenses in various jurisdictions.