Miranda Wadham on 13/05/2016For more information on ETX and how you can trade binary options through an FCA regulated company, you can visit their site here.
Binary options: be careful who you deal with
Any trader worth his salt will have heard of – and perhaps been intrigued by – binary options trading. Marketed across the Internet as an easy way to trade the markets and make money within minutes, companies often use enticing adverts that, for one site, include the wildly inaccurate claim that this was how Sir Alan Sugar made his millions. Through these sites, you have the chance to ‘trade’ just a range of markets including stocks, commodities and currencies, with a simple ‘yes’ or ‘no’ proposition. Simple, right?
Or not. The problem is, it is very hard to consistently predict what a stock or commodity will do within a short time frame – meaning that the ‘option’ amounts to little more than a bet. Let’s be clear – these ‘investments’ are no more than bets. The FCA do not regulate the binary options industry as they do with other financial markets, meaning that despite being marketed as ‘trading platforms for serious investors’, unsurprisingly, most of these sites are scams. There is no easy way to become a millionaire within month and these sites are no exception.
The most recent example of this is Banc de Binary which, earlier this month, was hit by an $11 million fine by American financial regulators after a three year court battle. Evidence was given to a federal court in Nevada that Banc de Binary lied to its customers, claiming that it had a ‘world headquarters’ on Wall Street when all it had was a maildrop accommodation address. In actual fact, the group is based between Cyprus, Israel and the Seychelles. Its CEO, Oren Laurent – also named in court papers as Oren Shabat and Oren Cohen – gave an address in Israel. And unfortunately, in the world of options trading, this story seems to be the rule, rather than the exception.
A quick scroll through message board comments highlights three main problems with these sites. The company encourage you to deposit money – as much as possible – and then when your account has a higher value, refuse to let you withdraw it. They have also been accused of stacking the odds against the ‘investor’, and rewarding clients with bonuses that have stringent terms and conditions attached – usually to the detriment of the investor.
Whilst next to none are regulated by official authorities in the UK, given their gambling characteristics, nearly all are regulated by Cypriot regulator CySec and governed by Cypriot law. As Cyprus is part of the EU, their regulations are supposedly as stringent as other EU countries, including the UK – giving investors peace of mind. But in practise, they are not. The aforementioned Banc de Binary was registered in this way, and was fined no less than five times by CySec – but were allowed to continue in operation until challenged by US regulators. The biggest scam to come out of the country is Cypriot trading platform IronFX. Its CEO is friends with the President – which always helps in a country run on bribery and corruption – but as ex-BBC presenter Freddie Rostand found during an investigation, the company has “serious cash flow issues.” Clients’ money is not segregated, and has even been confiscated by the company in order to pay its debts. Many trading with the platform were unable to withdraw their funds, often amounting to thousands of pounds.
UK Investor Magazine spoke to a trader with a similar story. After being convinced to place a significant amount of money with the options site, despite the company knowing that the trader had little experience in FX and commodities, the account manager bought 50 lots of gold, whose price then tumbled and led to a loss of $113,000.
The company continued to ask for more money, promising that the next trade would make a significant profit. After this proved untrue, the account holder refused to send any more money to the account. The company then stopped taking his calls and blocked him on Whatsapp. He said:
“I tried to call him or the company unfortunately, no one answered. I even asked some friends based in London to contact the company using their phone numbers, but no one replied”.
This company, like many others, is operated by parent company and registered in the UK, but based offshore. A quick browse of Companies House records show that the same officer – and the same address in London – is given for eight different ‘investment’ companies. Its parent company had also filed accounts in January 2016 for a dormant company – essentially meaning that it has ceased trading – but appears to be very much active from its website. Shady? Yes. Surprising, in that line of business? Not at all.
But what is surprising, given the prominence of these sites, is how few negative comments come up with a Google search of ‘binary options scam’. Aside from this article by Forbes – whose prominence even the SEO geniuses behind options trading platforms couldn’t trump – there are next to no articles by large financial news organisations revealing the extent of the scam. In fact, this Financial Times article even actively endorses them. What appears most are sites purporting to review options sites, offering advice and ‘real reviews’ – most of which are presumably run by the options sites themselves, given the lack of bad review. One such site named an options trading platform as FCA regulated – a blatant lie. When I pointed this out it was removed within days – but how many were led astray by this comment up until that point?
However, it is worth remembering that the binary options themselves are not the scam. Some FCA-registered trading sites do offer the ability to trade options, including IG and ETX. Whilst the options trading is still not regulated by the FCA, the companies themselves are and therefore you can be certain that any money you do win can be withdrawn by you. But the bottom line is this: sites offering binary options alone are bad news. At best, the chances of a good return are on a par with online poker – at worst, they’re a scam that will rinse you of your money. They are not legitimate, and they are certainly not an investment. And if you are okay with gambling away your savings, head to Las Vegas and do it there – your chances of winning are the same, and you’ll have a lot more fun doing it.
Morning Round-Up: MPC vote to leave rates at 0.5%, Apple shares sink, Germany strong in Q1
MPC vote 9-0 against a rate rise; Carney warns on Brexit
Governor of the Bank of England Mark Carney has warned strongly against Britain leaving the EU, saying that it could lead to a “technical recession”.
The statement came as the Monetary Policy Committee made their monthly monetary policy announcement yesterday. The committee voted 9-0 to keep rates at their record low in the face of mounting uncertainty over Brexit.
Mark Carney has come under criticism from the Leave campaign for voicing his opinions, with many calling for him to resign; Conservative MP Jacob Rees Mogg called his actions “unprecedented”, arguing that speculating over the effect on sterling is “not what responsible central bankers do”.
Apple shares sink as demand slows
Apple shares dropped dramatically yesterday to their lowest price in nearly two years, after a report suggested Taiwanese manufacturers should expect fewer orders this quarter.
Stocks were down over 3 percent in late afternoon trading, dropping below $90. They then recovered to close down 2.37 percent.
The company are seeing slowing demand around the globe, particularly in Asia, with product releases slowing.
Germany sees strong growth in Q1
The German economy grew by 0.7 percent between January and March, more than doubling the rate of the previous quarter.
Higher state and household spending combined with increased investment in construction pushed the economy forward, offsetting a slowdown in foreign trade.
Unadjusted data showed the economy expanded by 1.3 percent on the year in early 2016,
TalkTalk profits hit by cyber attack
Communications company TalkTalk saw their profits halve after a cyber attack last year, which cost them 101,000 subscribers.
Profits fells from £32 million last year to £14 million for 2016. However, the company reiterated their financial guidance for the 2017 financial year at between £320-£360 million.
Dido Harding, TalkTalk’s CEO, said in a statement:
“There has never been a clearer space for a trusted value champion and our learnings from and experience since the cyber attack have helped to focus our plans for the year ahead. We see strong opportunities for growth across all our products, both for consumers and for businesses, against the backdrop of an increasingly supportive regulatory environment.
12/05/2016
Morning Round-Up: Nissan-Mitsubishi deal, gloomy day for markets, Super Thursday
Nissan-Mitsubishi’s $1.8 billion tie-up
Nissan Motor Co is set to take a third stake in Mitsubishi, becoming its largest shareholder, according to local media reports.
The $1.8 billion tie-up is designed to boost Mitsubishi’s brand name in the wake of an emissions scandal, as well as enlarging the market share of Nissan. Trading in Mitsubishi Motors’ shares was suspended on Thursday before the announcement, jumping 16.6 percent on the news once trading resumed.
Mitsubishi became embroiled in an emissions scandal last month, which caused shares to plunge 40 percent and wiped $3 billion off its value.
Early on Thursday reports suggested that the two companies were discussing “various matters including capital cooperation”, later confirming a joint press conference.
Gloomy day for global markets
Asian markets fell on Thursday after a poor Wall Street session, a trend set to continue into Europe.
Toyota and Nissan shares brought down the market in Tokyo, edging down 0.1 percent before recovering at close. The Shanghai Composite closed up 0.4 percent down, with the Hang Seng down 0.78 percent.
European markets seem to have followed suit, with the FTSE opening down 0.4 percent and the DAX down 0.3 percent.
Bank of England’s Super Thursday
The Bank of England are set to publish its latest assessment of the UK economy today, dubbed ‘Super Thursday’.
After a spate of less-than-positive UK economic figures over the past few weeks, the Bank of England is expected to cut its previous forecasts; from the 2.2 percent expected growth in 2016 to 2 percent. The upcoming EU referendum continues to have an impact of forecasts, making it more unlikely that the bank will vote to raise interest rates from their low of 0.5 percent today.
12/05/2016
EU Commission blocks 02-Three merger
EU anti-trust watchdogs have blocked the tie-up between 02 and Three, after fears that it would lead to higher prices and reduced options for consumers.
Telefonica was planning to sell the O2 network to CK Hutchison, the owner of Three, in a deal worth £10.3 billion. It would have reduced Britain’s major phone networks to just three, prompting the European Commission to veto the deal.
European Competition Commissioner Margrethe Vestager said in a statement: “The goal of EU merger control is to ensure that tie-ups do not weaken competition at the expense of consumers and businesses.” “We want the mobile telecoms sector to be competitive, so that consumers can enjoy innovative mobile services at fair prices and high network quality.” The decision was made despite concessions offered by Hutchinson, including a five year price freeze.11/05/2016
Morning Round-Up: Sterling to fall 20 percent on Brexit, Toyota sees sales drop, hedge fund manager rich list
Sterling to fall 20 percent on Brexit, says think tank
Sterling is likely to drop 20 percent straight after a Brexit vote in June, according to The National Institute of Economic and Social Research (NIESR).
If Britain votes to leave the European Union on the 23rd June, the think tank also forecast soaring prices and a 1 percent drop in economic growth over the next year.
“The longer term impact of leaving the EU could reduce GDP by anything between 1.5% and 3.7% by 2030 depending on the subsequent relationship between the UK and the EU, as well as the rest of the world”, the Institute said in its report.
Toyota forecasts steep sales drop
Japanese automaker Toyota forecast a 35 percent fall in income for the current fiscal year, down to 1.5 trillion yen.
Vehicle sales were also down across most regions. However, operating income increased by 103.4 billion yen.
TMC executive vice president Takahiko Ijichi said: “Operating income increased by 103.4 billion yen compared to the previous fiscal year. The positive factors such as cost reduction efforts and favorable foreign exchange rates more than offset the negative factors such as decreased vehicle sales and increased expenses, particularly labor costs and R&D expenses.”
Shares have remained largely unaffected by the news, with Toyota (TYO:7203) trading down 0.76 percent after hours.
Top 25 hedge fund managers earn more than nations
The world’s top hedge fund managers earned more than the entire economy of Namibia last year, according to a report by Alpha magazine.
Kenneth Griffin, founder and chief executive of Citadel, and James Simons, founder and chairman of Renaissance Technologies, were in first place, earning $1.7 billion each.
Heavily criticised Wall Street salaries pale in comparison to these figures, with the US’s top banker Jamie Dimon taking home just $27 billion.
The list features 25 fund managers, and in its 15 year history has yet to feature a single woman.
11/05/2016
Easyjet sinks into red on weak demand
Budget airline Easyjet announced a larger-than-expected half-year loss on Tuesday, after terrorist attacks and strike impacted on sales.
The company disclosed a pre-tax loss of £24 million for the half year to March, a huge decrease from a profit of £7 million the year before. Analysts are expecting the company to report a pretax profit of £721 million for the 12 months ended September 30th.
Easyjet are the latest in a string of airline groups to be hit by weaker demand following terrorist attacks on European cities, including British Airways owner IAG and Lufthansa.
Shares are trading up 2.01 percent on the news, at 1499.54 (1122GMT).
10/05/2016
Morning Round-Up: Retail spending down, businesses change heart over EU, German economy stable
High street hit by cold weather, says BRC
The unusually cold spring has hit demand on the high street, with retail spending flat for the second month in a row in April.
The latest figures from the British Retail Consortium showed a weak demand for fashion and footwear, with consumers sticking with their old winter clothes in the face of chilly weather.
“Flat total sales mask a very mixed picture: some retailers benefiting from the healthy housing market, while other are evidently more susceptible to the effects of lower consumer confidence,” BRC chief executive Helen Dickinson said.
On a like-for-like basis, sales fell by 0.9 percent in April – their worst performance since August of last year.
Gap narrows between Leave and Remain in the business sector
More business people are planning to vote Leave in the upcoming EU referendum that initially thought, according to the latest survey by the British Chambers of Commerce.
54% of its 2,200 members surveyed in April said they would vote Remain, down from 60% in February’s survey.
37 percent will now be voting to leave, a 7 percent increase on two months ago.
However, 90 percent of those surveyed said they were now unlikely to change their opinion ahead of the vote.
Mixed quarter for German economy, but overall strong
The German economy has had a mixed quarter, with a drop in industrial output offset by a surprising increase in exports.
Industrial output fell 1.3 percent, well above the 0.2 percent forecast by analysts and its biggest decline since August 2014. However, foreign demand from outside the eurozone drove factory orders throughout March, propping up the economy.
Industrial output rose by 1.8 percent overall on the quarter:
“The industrial sector has overcome its foreign trade related weak phase of the second half of 2015,” the Economy Ministry said. “The economic trend in the industrial sector is currently pointing upward.”
10/05/2016
Crowd2Fund’s Chris Hancock: “A controlled launch of the Innovative Finance ISA is critical”
Recently, questions have been asked about the way the government and regulators have brought the new Innovative Finance ISA (IF ISA) to market. We think differently.
With any new product it is wise not to have an overly aggressive launch, which, as we’ve seen, can ruffle some feathers. By launching the IF ISA with only the few properly regulated platforms,rather than the entire P2P market, the launch can be more effectively controlled by government and regulators. Another advantage of launching the IF ISA with newer platforms is to allow these potentially challenging and more innovative platforms to offer more competition and choice in the marketplace. Failure to do this could result in a monopoly, similar to the one operated so dangerously by the large banks prior to the financial crisis.
It must be considered that implementing business procedures to manage the IF ISA across the entire sector and government departments will be no easy feat. The current approach will give businesses and government departments time to build the required processes without being overwhelmed with huge volumes and thus ensuring a smoother transformation of the ISA market. As this is an opportunity of up to £400 billion in potential investment funds, care must be taken in order to make sure that this development is not wasted and that investor funds are safeguarded.
One particularly onerous task with the roll out of the IFISA is that all IF ISAs across every platform must be reported to HMRC; this can only be achieved when post-launch volumes and nuances have been identified. Putting this in place requires a clearly thought through, properly defined strategy so as not to disrupt legacy reporting processes for other cash or stocks and shares ISAs. We are confident the government and regulators are working towards this plan. Giving newer players a boost will increase competition, which will accelerate innovation and the service provided for the consumer. This is the primary motivation for developing these new products in the first place. Our first-to-market IFISA app is a great example of this.
Crowd2Fund is one of the few crowdfunding platforms which is directly FCA regulated and is the only platform offering both debt and equity investment types. Whilst gaining full FCA certification was a lengthy process, it has helped us offer our customers a best-in-class service. We believe it is taking time for the older platforms to become regulated due to the enormous operational and technical shift required to build a robust platform that is compliant with the strict FCA standards, which are notably higher than the previous obligations of P2P platforms. If platforms continue to steam ahead without these processes in place, the financial services sector will be vulnerable to even greater risk, possibly compromising the security and credibility of the UK economy at large, as well as the FinTech industry. At Crowd2Fund we’re thrilled to be offering our IF ISA at a generous 8.7% APR return* and help ambitious, innovative British businesses grow at the same time. We will continue on our path of slow, steady, sustainable growth whilst continuing our aim to offer consumers the best product and service in the marketplace.Chris Hancock, CEO of Crowd2Fundwww.crowd2fund.com *APR quoted is before fees and bad debt
“Peace in Europe at risk” without the EU, says David Cameron
Peace in Europe could be at risk is Britain decides to leave the EU, David Cameron has warned, as polling day grows closer.
The Prime Minister said that Britain has regretted “turning its back” on Europe in the past, and said that the EU was central to peace-keeping within Europe. He argued that “isolation” has never served Britain well, continuing: “Can we be so sure that peace and stability on our continent are assured beyond any shadow of doubt? Is that a risk worth taking? I would never be so rash as to make that assumption.” However the ‘Out’ campaign has called this argument into question, saying that regardless of whether the country votes to leave the EU NATO will keep Britain safe. With the 23rd June polling day just over a month away and local elections out of the way, campaigns on both sides are heating up. View our video of how the campaigns stand so far below: