New Zealand will now require binary options and CFDs to obtain local license

5th of April 2017

Binary options companies and CFDs firms that have been offering their services in New Zealand will now need a license to do so in future. In fact, this broad legislative change will affect all financial organizations that provide CFDs trading with contracts expiring within 3 days.

The country has arrived at the decision after it has become apparent that unlicensed financial operators are responsible for a sizable number of all complaints filed against such organizations in the country.

Of particular prominence are the complains lodged against firms for failing to process withdrawals properly. The financial oversight body has noted with concern that short-term derivatives are high risk products, more so when offered by unlicensed operators.

Therefore, by introducing this requirement, Zealand’s Financial Markets Authority (FMA) hopes to provide some much needed stability in an industry that is slowly losing its credibility. The issue has actually been of concern to the authority for some time, as confirmed by Liam Mason, the current FMA Director of Regulation.

Even so, the regulator has been working with other stakeholders before arriving at this decision. Before then, it has been observing the industry to see its development over time.

The significant amount of client complaints about the services offered by binary options and CFDs firms has forced the organization to make this decision.

But even now, the FMA is still working on any kinks that might face the implementation of the new requirement. In particular, there are concerns as to whether spot FX contracts settled physically should be classified as derivatives for the purpose of the Financial Markets Conduct Act.

FMA has the power to declare such financial transactions as derivatives. However, it wants to get feedback on the issue before making the final call.

The authority is concerned that regular spot FX contracts might be unnecessarily affected by this law, which is why it wants to be certain before making its decision about their categorization.

The concerns are born of the understanding that some providers of these financial services might not be required to have a license to provide their services. In such a case, a wrong class designation could complicate things.

New Requirement to Come into force From December

The new licensing requirement will come into force as from December of this year. It will not matter if the firm has been licensed elsewhere in the world or not – a local license will be required for such an organization to operate legally in New Zealand.

It is this body’s belief that introducing mandatory licensing will make the industry safe and stable. In fact, it is expected that the binary options and CFDs firms will have applied for a license by August 1, 2017.

Although the decision to license the binary options industry is quite a huge turning point for the Asian-Pacific country, major players in the industry are not too surprised by the move. Throughout the world, providers of financial services are being forced to apply for local licenses to offer their services in many countries.

Consequently, all that is left for binary options firms with a strong presence in New Zealand is to adjust their operations appropriately so that they can stand a chance to obtain the local license. If all goes according to plan, such operators have little to fear as far as the future of their business within the country goes.

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