The Japanese binary options market could be due for an upheaval according to one financial newspaper, the Nikkei, which said recently that a framework for regulating binary options has already been decided. Though there has been no official word from the Financial Services Agency or the Financial Futures Association or from the opinion makers within the binary options industry, those in the know believe that the Nikkei's observation has some validity and will likely include a number of rule changes which will prohibit some options trading which are available elsewhere, as well as offer various consumer protections. For example, it is believed that specific types of binary options will not be permitted, such as High/Low types which are generally seen more as gambling rather than financial trading. Short term options, i.e. less than 60 seconds, will also likely be prohibited. Protections are likely to include limitations for trade volume and maximum daily loss per trader, as will spread options. Furthermore, binary options brokers will be required to make disclosures regarding profits and losses as well as their rationale for halting trade on certain types of options.
Japan is the second country to attempt binary options regulation in the past year, following Cyprus, which announced its regulatory intents in May 2012. Since that time very few brokers have actually succeeded in earning regulation (with Optionweb being the one success story we can think of offhand), but we understand that the number of applications is rising at a slow but steady pace.
Analysts believe that what these rules and regulations are likely to do is to further impede the binary options market in Japan. Moreover, it is certain to lessen the attraction to Japan's Forex market in general. They expect that trading volumes for binary options will be considerably reduced, and in recent months deposits have been as high as $20 million. In comparison, the entire binary options market, exclusive of Japan's binary market input, is estimated to be about 25% less than that in a given month.