Binary Options Trading in Germany
Germany is the biggest economy in Europe, and its financial market structure is very strong. Some of Germany’s banks are the largest liquidity providers in the financial markets. With this strong financial market structure, it is expected that binary options trading in Germany should not be lagging behind. So what is the state of binary options in Germany? Are German traders still making money from it?
Germany’s financial markets are regulated by the Federal Financial Supervisory Authority (BaFin). When compared with other European regulators, BaFin is much more established and has had more experience in dealing with and regulating financial market operators. BaFin’s role has been more of guiding the financial markets in the right direction and not overtly butting heads with creators of new financial products.
Sometime in 2016, BaFin considered banning the trading of binary options and did a lot of consultation to this effect. The German Retail Investor Protection Act is a German law which permits BaFin to perform what is known as product intervention, as a means of protecting the consumers of a financial market product. This product intervention could be done in several ways, such as altering the way a product is offered. However, BaFin recognizes the need to balance the protection of the consumer as well as the growth and sanctity of the financial markets, by keeping any such interventions to an absolute minimum.
The regulation of the financial markets in Germany is carried out by BaFin. BaFin requires binary options brokers and other brokers offering OTC derivative assets to acquire a BaFin license. However, BaFin also recognizes other offshore brokers regulated within the European Union, such as those bearing the CySEC license, and allows them to offer their products to German citizens in the spirit of MiFID.
Presently, the only product intervention that has been carried out after the 2016 consultations and hearings held to consider the ban of forex and binary options in Germany, is the mandate to all brokers to provide negative balance protection to their clients. No restrictions on the trading of binary options in any form have been reported. This modification did not extend to the binary options market because by the very nature of the market, traders can only lose what was invested in trades and not more than that.
Consequently, German binary options traders are still actively trading with EU-regulated brokers in Germany, Cyprus and other EU countries.
Currency Pairs & Spread
Presently, majority of traders in Germany trade with Europe-based binary options brokers, most of whom are located in Cyprus. Germany’s Xetra DAX is a prominent feature in the stock index market class of many platforms, as well as several Euro-based assets such as the Euro currency pairings with the US Dollar, British Pound and Japanese Yen.
Bid/Ask price quotes are not a feature of these platforms. However, the expiry value of the assets used for trading binary options contracts are determined using the bid and ask prices of the assets as set by each broker.
A mix of proprietary and turnkey trading platforms will be encountered by German binary options traders. The use of turnkey platforms designed by SpotOption, Tech Financials and Tradologic among many CySEC-regulated brokers have undoubtedly made these the favoured platforms among German traders.
German traders who use CySEC-regulated binary options brokers will no longer receive any bonuses when they sign up with these brokers as a result of the CySEC bonus ban. If they sign up with brokers in jurisdictions in Belize, Seychelles and Vanuatu, they are likely to be given bonuses.
Deposit and Withdrawal Options
Germany has a very robust banking and financial technology structure, making it easy for German traders to transact on binary options platforms. The top binary options brokers for German citizens accept deposits and can fulfil withdrawals using these methods:
- Bank wires: Commerzbank is a highly favoured bank for segregation of traders’ funds and is used by many financial market companies. Other banks such as DKB also provide bank wire services to traders.
- Digital wallets: German binary options traders have access to international prepaid wallets Skrill and Neteller. They also have access to local e-payment methods such as Sofort, which is extremely popular and is a home-grown German company.
- Card Options: Many German banks issue credit/debit cards which are endorsed by the international brands MasterCard and VISA. ComDirect, DKB, ADAK and ING Diba are some of the local cards issued.
Legality & Regulations
What are the legal considerations and regulatory conditions attached to the trading of binary options in Germany? Binary options in Germany are classified As OTC derivative instruments and are presently not prohibited. BaFin allows offshore brokers with valid licenses to conduct business with German traders. BaFin also licenses a few binary options brands which have sited branch offices in Germany.
Here are the frequently asked questions that most users may have about what the binary options industry in Germany looks like.
- Are binary options legal in Germany?
Answer: The trading of binary options in Germany is legal, if done with regulated brokers within the EU.
- Is it safe to trade binary options in Germany?
Answer: It is safe to trade binary options in Germany.
- As a German citizen, am I allowed to trade binary options with offshore brokers?
Answer: BaFin allows the trading of binary options with EU-regulated brokers as part of the MiFID protocols.
- Can BaFin help me to check the status of a binary options broker?
Answer: BaFin performs due diligence on EU-based brokers and shares information with regulators such as CySEC. Therefore, BaFin maintains a database of both its locally regulated and EU regulated binary options brokers. You can check the BaFin website for this information.
- What digital wallets are available in Germany?
Answer: Sofort is a German digital wallet company based in Munich. Other digital wallets that are available to German binary options traders are QiWi Wallet, Yandex Money and GiroPay.
Best Binary Options Brokers in Germany
As at the time of writing, the trading of binary options is not yet prohibited in Germany. This could change at any time as BaFin is still consulting widely on the issue. It is advisable to open a binary options trading account with these brokers before any rule changes make it difficult or impossible to do so. The brokers on this list are regulated binary options brokers, which reduces the level of risk you are exposed to when seeking brokers to do business with.
It is clear that Germany has opted to use a softer and more level-headed approach in dealing with the issue of the legality of binary options trading within its borders. BaFin is still consulting widely to determine if binary options under the present system is safe for German traders. BaFin also maintains a healthy relationship with other regulators, working with them to identify unlicensed entities that may cause problems for local traders.
Whether binary options will continue to be traded in Germany will depend on whether BaFin keeps the status quo or decides to align itself with other European regulators in Belgium, Netherlands and Turkey. Time will tell how things will go in Europe’s biggest economy.