Changes to New Zealand Regulation

New Zealand is another country which appears to be tightening regulation when it comes to Binary Options and CFDs. The New Zealand Financial Markets Authority (FMA) has announced that all brokers who intend to sell residents short term investment instruments (under which Binary Options and CFDs fall) need to apply for a license from the regulator.

This appears to be because of the risks that the FMA sees inherent in these instruments. They also held a number of discussions with brokers who are currently offering them in the country.

According to a statement by the FMA director, Liam Mason “We have been monitoring developments in the market since the introduction of licensing for derivatives issuers. We have also been receiving a steady volume of complaints about short-term FX trading and other derivatives products.”

When will it be implemented?

According to the timeline provided by the FMA, all brokers that offer investments that settle in 3 days, irrespective of whether they are based in New Zealand or not, will need to apply for a license. The laws will start being enforced from December 2017.

This may indeed also include spot forex agreements that are settled within 3 days. The FMA has asked whether for public comment on whether these contracts should not be treated as derivatives for the purposes of the Financial Markets Conduct Act.

Those individuals who wanted to provide input to the FMA, they can do so here. The FMA is considering changing the designation in the Act.

Mr Mason continued “Short-term derivatives are very high risk products and this risk is exacerbated when they are offered by unlicensed providers. About 40 per cent of the complaints we receive are about unlicensed derivative-issuers, and a common theme is that people have difficulty in getting their money back.”

“We believe this approach provides certainty to the industry about the scope of derivatives’ regulation. We also want to ensure that ordinary spot FX contracts are not unintentionally captured by this change. So we are consulting on a class designation for these contracts to ensure issuers of these products do not require a license.”

If a broker wants its services to remain uninterrupted over the period, then they must apply for a license by the 1st of August. This is indeed another hurdle for brokers who wanted to expand their operations into the Asia Pacific region. However, it could also make certain that people are not subjected to dubious practices by scam brokers.