Binary Options Trading in Asia

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Binary Options Trading in Asia: There is no doubt that the popularity of binary options trading is fast increasing the world over. There is also no doubt that Asia is the fastest growing continent in the world. Thus, it was only a matter of time before binary options found its footing in Asia. Gone are the days when binary options were only the purview of the Americans and the Europeans, other continents including Africa and Asia are warming up to the financial phenomenon, for lack of a simpler word. The eyes of the world, and those of binary options brokers, are now paying more attention to the Asian powerhouse which includes China, Japan, India, Malaysia, Singapore and Indonesia.

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What are Binary Options?

The term binary refers to something that has two parts. Binary options therefore can be defined as a financial trading instrument that comprises of several ‘options’ each with two choices or possible outcomes. Basically, in binary options, one forecasts/predicts whether the price of an asset will rise or fall within a certain time frame and puts up an amount of money to that effect. Now, that’s one instance of binary (double) options. The value of the asset can either go up or down, there’s no other ways for the asset to go. In most cases, the extent of the rise or fall doesn’t matter, only the direction of the movement.

asian binary options trading is highly popular
binary options trading in asia is highly popular

Another dimension of the two-option nature of binary options is the win or loss scenario. Here, one either wins the full payout, usually predetermined, or loses all their investment. You cannot win partial payouts or lose only a certain part of your investment. For example, if you had predicted that within one hour, the value of Samsung’s stocks will be higher than $101.5 and ‘bought’ a high option worth $100 with 85% potential payouts, and it comes to pass; you will receive your original investment back plus an additional payout of $85. If it doesn’t come to pass and the value of the stock is actually less than $101.5, you will lose the whole amount you had put up. The third scenario where the value remains constant can be regarded as a spoilt trade and the trader gains nothing and loses nothing.

As the above example shows, you cannot lose more than you have put up and you will always know the pay out for a win. There are no commissions in binary options, unlike in forex and stock trading where the brokers usually charge a commission of a certain percentage of the realized profits.

Binary Options Trading in Asia

 

As Asia is a big region made up of several countries each with its own rules and regulations, it is only right to subdivide the topic and look at each country on its own. The following list looks at how binary options trading fares in the various Asian countries.

Binary Options in China

Arguably the biggest country in the world in terms of population and the second largest economy, China is every investor’s dream. However, its long history of restrictive laws and regulations that ban anything from Google to YouTube has largely kept investors away. The good news for binary options brokerage firms is, the Chinese government has not yet found a reason to directly address, or rather ban, binary options in the country. Knowing the Chinese government, this may or may not change in the near future. For traders and brokers alike, it’s a matter of crossing their fingers and hoping for the best, but having one foot out the door, ready for anything.

When it comes to real binary options trading, China lags very far behind, despite hosting three of the biggest stock exchanges in the world. Currently, there are no brokers who are based in China and only one, AnyOption, with a Chinese platform. This lack of attention by brokers towards the country is disappointing, considering the poverty levels there are very low and a lot of families have disposable income from the many economic activities they engage in. A good broker would know how to convince them to invest all or part of that amount into binary options trading.

binary options trading in asia has led to good profits
Binary options trading in Asia has led to good profits

When it comes to binary options regulation bodies, there are none in China except perhaps the Central Bank, which only regulates financial institutions, including brokers based within the country. Foreign based brokerage firms are exempt from this policy but for a smooth trading experience, we advise Chinese citizens interested in binary options to look for brokers that are licensed or regulated by European bodies such as CySEC and the EU. These bodies are the best in the world when it comes to setting and inspecting quality standards in the financial industry, within which binary options falls.

The only policy that could perhaps pose a problem for traders in China is the one limiting the amount of money a Chinese citizen can invest outside the country to $50,000 per year. This is probably meant to encourage people to invest more within the country since foreign investments are very few. Nonetheless, the requirement won’t pose much of a problem for binary options traders as $50,000 is more than a standard trader would normally invest as the capital requirements in binary options are very low. Most brokers will ask for a minimum deposit of about $250 and there are even some who go as low as $10. The Chinese are known to find ways to get around the tough laws in their country and it wouldn’t be a surprise to anyone if some traders used family or friends’ credit cards to make deposits. After all, the government can’t really snoop on a billion individuals, can it?

Binary Options in Japan

Japan’s population is way smaller than that of China but as a fast growing economy, it can’t be ignored. The good thing about the country is that the government is known to be a bit more accommodating and the rules there are very friendly to investors. Binary options is 100% legal in Japan and unlike China, there is no limit to the amount a citizen can send out of the country. Japan can be considered quite a conservative country and its entire financial system is strictly regulated by the Financial Services Agency (FSA). The body was established in 2002 and is responsible for the supervision and regulation of every sector that deals in finances, including the banking, insurance and accounting industries.

Since it wouldn’t be entirely possible for the FSA on its own to supervise all the financial services companies within the country, it has a department that deals with matters like the securities exchange, within which binary options can be classified. The body, based in Tokyo, is known as the Securities Exchange Surveillance Commission (SESC) and its mandate is to license and closely monitor the activities of firms involved in the buying and selling of securities. Note that this only applies to firms based in the country and not every firm that transacts with Japanese citizens. The strict financial regulations keep many brokers out of the country. Many prefer to set their bases in countries with less restrictions such as Cyprus and serve Japanese traders, along with those from the rest of the world, from there.

Japan has a growing middle class which is increasingly looking for alternative investment platforms, away from the usual real estate and stock trading. This is good news to brokers who will definitely have an easy time attracting the attention, and money, of the wealthy and experimental Japanese citizens. Furthermore, the lack of any brokers headquartered in the country is not a big issue since binary options is not like stock trading where physical visits to brokers’ offices are necessary. Here, traders can sort out any issue with their broker or ask any questions they might be having via Skype or email.

asian traders are good risk takers, that is why they succeed
Asian traders are good risk takers, that is why they succeed

Binary Options in Singapore

Singapore, though often overlooked, is among the fastest growing economies in the world. Whether in insurance, tourism, manufacturing or the service sector, there is a lot of money in Singapore. Binary options is not quite as popular in Singapore as it is in the other Asian countries. This is however not due to any negative reviews or anything else other than the fact that Singaporeans only became aware of binary options about two years ago. With that being said, a few significant steps have been made in making people aware of the potential returns and convenience of binary options. The Monetary Authority of Singapore is the body responsible for regulating all financial institutions, including brokerage firms.

Binary Options in India

India has quite a big population, some of whom reside in almost every corner of the world. Traditionally, India is a trading country and its citizens are known for their entrepreneurial spirit. They do not just trade in tangible goods alone; the Indian Securities Exchange is the oldest in Asia and among the oldest in the world. Although, binary options may have been only recently introduced, the concept of asset trading has been around for centuries.

It is legal to trade in binary options in India, which is not known to have very tough laws. Binary options, and all financial services are under the supervision of the Securities and Exchange Board of India (SEBI). The body gives out licenses to brokerage firms intending to set up shop in India and monitors them to ensure that they stick to the rules. There are currently no Indian-based binary options brokers although many European brokers accept Indian brokers, provided their government has no problem with that. When it comes to the trading language, only one broker, One Two Trade has an Indian version of their site. Hopefully, this will change soon as brokers everywhere realize the amazing potential of the Asian market and India in particular.

Even the old traders can learn new thing with binary options
Even the older traders can learn new things with binary options

Binary Options in Malaysia

Malaysia has not been left behind by the binary options bandwagon. Investors and even ordinary people in the country are warming up to binary options trading as a platform for channeling their investments. Binary options is legal in Malaysia and all activities are supervised and regulated by the Securities Commission of Malaysia, which operates under Bank Negara Malaysia, which oversees all financial services.

We did not come across any broker based in Malaysia but found quite a number of firms operating from other countries accepting Malaysian traders. That is, if they understand English since there’s no site translated into Malay, the country’s national language. Chinese / Mandarin speakers are quite lucky as there is a trading platform in their national language, as mentioned earlier.

Binary Options in Indonesia and the Philippines

The Indonesian and Philippines governments have no issues with binary options although some might consider the taxes on returns to be a bit high. There are no particular binary options regulation bodies that we know of, except maybe the Central Banks of the two countries, which are normally in charge of the whole financial sector. As such, we advise traders based in these two countries to look for brokers regulated in the EU, preferably by CySEC to be assured of quality service and reliability.

Conclusion

As the rest of the world experiencing slow growth, Asia is among the very few regions set to register double digit economic growth in the coming years. Naturally, as Asians become richer, they will start looking for ways to invest and binary options, with its high returns, is as good as or better than other options.

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References and Further Reading

  1. Predictive ability and profitability of simple technical trading rules: Recent evidence from Southeast Asian stock markets
  2. Co-movement of Asia-Pacific with European and US stock market returns: A cross-time-frequency analysis
  3. The relationship between stock price index and exchange rate in Asian markets: A quantile regression approach
  4. Dynamic linkage between real exchange rates and stock prices: Evidence from developed and emerging Asian markets
  5. Does option trading convey stock price information?
  6. Does the Introduction of Stock Index Futures Destabilize the Spot Market? Some Cross-Country Evidence from Asia
  7. Who moves East Asian stock markets? The role of the 2007–2009 global financial crisis
  8. The causes and impact of the Asian financial crisis
  9. The bivariate GARCH approach to investigating the relation between stock returns, trading volume, and return volatility
  10. Econometric modelling of stock market intraday activity
  11. Causality between trading volume and returns: Evidence from quantile regressions
  12. Cointegration relationship and time varying co-movements among Indian and Asian developed stock markets
  13. A review of the international literature on the short term predictability of stock prices conditional on large prior price changes: Microstructure, behavioral and risk …
  14. Multinational enterprises from emerging markets
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Author: Michael Allen

Michael Allen is the main author at www.binaryoptionrobotinfo.com. He holds a PhD in Economics and has worked in investment banking for 24 years.