MAS warns against trading binary options with unregulated platforms

Financial losses have already been incurred.

The Monetary Authority of Singapore has issued a warning to investors regarding the trading of binary options with unregulated platforms.

The warning comes in the wake of an increase in the number of complaints from investors who have suffered financial losses from such investments.

A binary option is a type of option contract that references an underlying instrument such as stocks, commodities, currencies, and interest rates. According to MAS, unregulated platform providers often use marketing catchphrases such as “trading with zero risk”, “trading amounts of as little as $1”, and “profit payout of 500% per trade” to entice investors to invest.

"Contrary to promises of low investment risks with exceptionally high returns, binary options are in fact speculative and risky investment instruments. There is a high chance of the investor losing his entire investment amount, whether the investor deals with a regulated or unregulated entity. Further, an investor is always exposed to investment risk, whether a product is regulated or not," noted MAS.

Moreover, many of these unregulated platforms are deemed fraudulent and based outside Singapore. Investors who choose to trade with these platforms are unlikely to recover what is lost.

"Investors should know that if they choose to deal with unregulated entities, they will not have access to avenues for dispute resolution should a dispute later arise," stressed MAS.

In order for investors to protect themselves, MAS suggested to think carefully about the claims being made about the products offered.

"If the touted ease of making significant profits sounds too good to be true, it probably is. Always assess whether the investment being offered is suitable for you, in light of your investment objectives and personal circumstances," it stated.

More so, investors should also check if the entities offering the products are regulated by MAS. Investors are given the access to the MAS Financial Institutions Directory, as well as the MAS Investor Alert list.

MAS urges those who suspect that fraud is involved in entities or platforms offering binary options or other products promising unrealistically high returns to submit information online to the authorities.