Binary Options Trading in UAE
UAE is a country in the Middle East which features 7 emirates, of which Dubai and capital Abu Dhabi are the most popular. These two emirates are well known as luxury locations, with a constant flow of tourist dollars. The UAE is also a transit hub between the Americas, Africa, Europe on one hand, and the Middle East/Asia on the other hand. There is a large financial services industry in this country, which makes it an investment destination for market players and brokers alike. Binary options brokers are not left out, and many of them are actively seeking for their share of the petro dollars flowing in the UAE. But what is the state of binary options trading in the UAE?
Most of the financial market activity in the UAE is domiciled in the financial free zone located in Dubai, known as the Dubai International Financial Centre. The financial markets in UAE (specifically Dubai) are regulated by the Dubai Financial Services Authority (DFSA). The DFSA provides supervision and regulation for a total of 594 entities. This is broken down into 457 Authorised Firms, 16 Registered Auditors, 119 Designated Non-Financial Businesses or Professions (DNFBPs) and 2 Authorised Market Institutions.
The DFSA is not only interested in regulating brokers (authorized firms) in all market categories, but also the companies that provide the support structure on which brokerage services operate. That is why companies involved in the following areas are also covered with unique license categories:
- Financial technology or FinTech companies can apply for an lnnovation Testing License (ITL). This license covers companies in the payments space that may want to test a new payment product being developed for the financial markets without having to apply to become an authorized firm.
- Individuals: Experience, knowledge and qualifications are the three metrics evaluated for individuals who will perform licensed functions in authorized firms.
- Authorized Market Institutions (AMIs) function as exchanges and clearing houses for brokerage firms in Dubai.
These are the categories of licenses issued by the DFSA. So what is the state of binary options regulation in the UAE?
The DFSA provides a regulatory template for the offering of contracts in derivative instruments such as binary options. Binary options are considered a risky financial product to trade. Most binary options traders in UAE trade with offshore brokers. The requirements for obtaining a license to offer binary options as a financial product in the UAE are so stringent that many brokers simply look for other places where entry requirements are more lenient. This void has been noticed by many offshore brokers, who are now targeting the local trading population with aggressive pay-per-click marketing. A recent survey of 30 popular financial trading hubs across the world revealed that UAE was the 10th most expensive pay-per-click ad destination and also ranked number 1 among Arabic-speaking nations on the most expensive ads click rates list. This shows the high competition among companies for the trading dollars of Emiratis.
Currency Pairs & Spread
Many offshore trading platforms feature a large pool of trading assets of Middle Eastern origin, especially when it comes to crude oil, stocks and stock indices. The Emirati Dirham (AED) is not offered for trading on binary options platforms. This leaves Emirati traders with the option of trading just the familiar Middle Eastern assets or the major currency pairs.
The type of trading platforms that will be available to UAE binary options traders are a function of what offshore brokers are used. There will be a predominance of turnkey platforms designed by companies such as SpotOption and Tech Financials.
The FCA and CySEC have banned the use of bonuses on binary options platforms. Therefore, these will not be available for Emirati binary options traders who open accounts with brokers that are CySEC-licensed.
Deposit and Withdrawal Options
The DFSA has provided a robust opportunity for the FinTech industry in UAE to grow. As such, traders in the UAE have access to the following payment channels:
- Bank wires: Emirati binary options traders can use bank wires to fund their accounts with European-based binary options brokers.
- Digital wallets: Several digital wallets are available to UAE binary options traders. These include Skrill, Neteller and CashU.
- Card Options: Local credit cards in UAE, linked to bank accounts can also be used to make deposits and withdrawals, subject to approval for each individual binary options broker.
Legality & Regulations
What are the legal considerations attached to binary options brokerage and trading within the UAE? On the trading end, there are some restrictions which not only limit the participation of Emirati traders in financial markets, but also make it hard for companies to take up the DFSA license.
- Only professional investors are allowed to trade risky derivative products such as forex and binary options. Such investors must have at least $1m in liquid assets.
- The use of the local currency within the confines of the DIFC is strictly prohibited. Only foreign currency assets are accepted in this zone.
- Companies (brokers, including those in the binary options sphere) must seek special permission from the DFSA to offer financial products to the retail investing public.
- Introducing brokers working as authorized firms are allowed to introduce clients to their parent brokers, provided these brokers are FCA-regulated or CySEC-regulated.
- Comprehensive information on any such referrals must be kept and submitted periodically to the DFSA for scrutiny.
- Any files or documents used for advertising of the financial products within the UAE must be available on-site within the authorized firm’s offices.
With such stringent measures in place for authorized firms to comply with, many binary options brokers simply do not bother to setup shop. Those that do prefer to work with introducing brokers.
Here are the frequently asked questions that most users may have about what the binary options industry in UAE looks like.
- Are binary options legal in UAE?
Binary options trading in the UAE is considered legal, if the companies offering it get the Authorized Firms License within the UAE, or are licensed as Authorized Firms but represent brokers licensed in the UK and Cyprus.
- Is it safe to trade binary options in UAE?
Answer: It is safe to trade binary options in the UAE if this activity is done with regulated brokers. The list of such brokers is displayed in the next section.
- How do I check the status of a binary options broker?
The DFSA has an internal search engine on its website where traders and members of the public can check on the regulated status of a DFSA-licensed firm. All regulated companies are listed in a DFSA Public Register. It is also possible to contact the DFSA about the status of a firm using a special form known as the Supervised Firms Contact Form.
- Are there any local binary options brokers in UAE?
Answer: There is no information as to whether there are any local binary options brokers in the UAE.
Best Binary Options Brokers in UAE
The best binary brokers in the UAE are by definition, mostly brokers regulated by the Financial Conduct Authority and the Cyprus Securities and Exchange Commission (CYSEC). The DFSA allows such companies to work with locally licensed companies, who will function as their introducing brokerages. We therefore present you with a list of the best binary options brokers in the UAE:
The licensing conditions for binary options companies in the UAE are quite stringent, but there are signs that the DFSA is amenable to easing of some of its regulations so as not to stifle the market completely. This is evident in the granting of a retail forex license to the IG Group. Due to the wide product offering of the IG Group, it could not open shop in UAE under the current licensing regime. The company had to enter into extensive negotiations to iron out the situation before it was able to launch in the UAE.
It is therefore likely that companies which are serious in setting up shop as binary options brokers in Dubai, may get similar results if they try. Until then, Emirati traders should exercise caution and choose only regulated offshore brokers for their trading activity.