For those that are new to binary options trading, there is a lot of confusion on the legality of trading binary options in various countries across the globe. One of the reasons for this concern is the amount of risk associated with binary options trading and of course the question, is binary options considered gambling or is it more like trading?
Many regulators across the globe are asking themselves this exact question. Although there is a lot of confusion on whether someone can legally trade binary options in India, the market is on the rise there. Many people in India consider this type of online trading to be a blessing, a way to make an extra income or even to use it as their full time job.
This is because it is so quick and easy to turn a gain from the binary options you have purchased. Instead of purchasing “x” amount of shares in stocks and waiting a certain period of time for the company to grow and profits to increase, you can see you profit is sometimes within minutes. Secondly stocks is extremely expensive, for instance Apple Stock is currently $145 for just one share! However if you trade binary options then you are speculating on the price movement. As you never actually own the stock, it’s much more affordable to trade.
Read my earlier article about how to trade binary options here if you are ready to learn the basics
Following the global crisis that took place in 2008, the way that people invested their money came with more restrictions. The governments were forced to close any loopholes that could potentially lead to another global crisis. This is why so many people are curious to know whether trading binary options in India is legal or illegal. Another reason people are worried if it is legal is because there are no brokers in India that offer binary options trading.
Regulation Binary Options in India
While the Reserve Bank of India and the Securities and Exchange Board of India tightly monitor and control Forex trading, there is no such measures in place over binary options. The reason being is that Forex goes against the Foreign Exchange Management Act (FEMA) whereas with binary potions you are speculating on a price movement, not actually buying a currency itself.
As a result Indian traders can trade with brokers based anywhere. This does pose risks for them.
Risks of binary options trading
Whenever someone in India wants to trade binary options, they have to go offshore. This is another issue for traders in India, because some offshore brokers are unregulated and there is a risk of the offshore brokers running a scam and robbing people of their money. Indian traders are then largely unprotected. This adds to the further risks that naturally come with binary options. When you invest in binary options, you are investing in fluctuation. This means you have the option to invest in whether the stock will increase or decrease. Very similar to the stock market, but the chance of success is the same as if you were to invest in penny stocks. This is why the Reserve Bank of India and the Securities and Exchange Board of India doesn’t regulate binary options.
Many people view binary options as pure gambling, because you will either have a huge loss or huge gain. There is no in-between in purchasing binary options. Although there is little to no protection in binary option trading, it hasn’t stopped brokers from going after clients all over the world. Most brokers are able to work with any client from any country. The trader also has to make sure that the brokerage firm is dependable and trustworthy. One of the characteristics to look for in an offshore broker is their reputation. Is it reputable and established? Do they provide quick withdrawals with little to no hassle? Also, it is a plus if they have high returns. Do they offer a wide range of instruments that you can use to trade with? Are they operating under regulatory oversight?
Your Rights in Binary Option Trading
Although binary options trading is unregulated, it doesn’t mean that they are illegal. This doesn’t mean that there isn’t any illegal activity taking place, but simply that you are not at fault in India for trading binary options. A number of new traders and even active, experienced traders in India will ask this question. The biggest reason is that they see the big difference with forex trading that is done in India, because of their tight regulations that are enforced by the Securities and Exchange Board of India. Indians that trade binaries don’t have to face all of the same legal restrictions as forex trading. One of the key reasons there are strict regulations in forex trading is the Reserve Bank of India (RBI). The main focus of the RBI is the current account deficit that India is facing.
Due to this serious issue, this organization is working to limit the outflow of their INR currency. This is why traders have to deal with currency pairs in the forex market. This involves exchanging their INR currency for EUR and USD currency. The RBI feared that forex trading would eventually lead to traders in India violating the Foreign Exchange Management Act (FEMA). This limits an Indian trader from trading on forex, unless the currency being traded pairs with the INR. Whenever you remit money out of India, you have to specify the reason. This means that there are limits on the amount of money you can deposit, whether you’re using a bank wire transfer or credit card.
You Can Start Today
Technically, you have every right to trade binaries in India. The biggest reason is that they have not established any legal framework to govern binary options trading in India. Also, there is no regulatory body for binaries in India. One of the ways you bypass the usual rules and regulations is that you aren’t necessarily trading with the currency of India. Instead, you are trading on a derivative. This is one of the key reasons that the Securities and Exchange Board of India (SEBI) won’t issue any licenses to binary brokers, nationally.
To start trading in India, you will need to sign up with a brokerage firm that is based offshore to trade binaries. At the same time, this limits the number of brokers you can choose from because a majority of the offshore brokers do not support Hindu or Bengali on their websites. This becomes an issue for the traders that don’t communicate in fluent English. Thankfully, there are some firms available for those that may face these problems. There are a number of different brokers that actually cater to the needs of traders that reside in India.