I read a couple of interesting articles today stating that the CFTC has been successful in shutting down two firms based in Ireland, Intrade and Trade Exchange Network, who provide binary options trading;
Binary options are essentially contracts that payout on an "all or nothing" basis. For a binary call option you may, for example, pay $50 that a security will be trading above $25 in one week. If you’re right you will be paid, for example, $120, if you are wrong you lose your initial $50 investment.
Binary options are traded on a range of securities and offer up (call options) and down (put options) scenarios.
In the sacbee article the CFTC is quoted saying that "It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called 'prediction' contracts, unless they are listed for trading and traded on a CFTC-registered exchange or unless legally exempt."
So does this mean that a US retail trader can only trade and invest in stocks/commodities in the US? No foreign ownership possible?
As an Australian I can easily trade abroad through my Interactive Broker’s account without much restriction. India and Mexico are the only exception that I know of. Those countries don’t allow foreign investment by individuals at the moment.
I just found it strange that Americans cannot invest abroad as individuals – unless I am wrong?
Comments welcome!
PeterApril 21st, 2018 at 1:01am
Thanks Chris! Can an investor in the U.S access other exchanges directly though or does the trading have to be via a U.S participant? I was reading this from the CFTC:
https://www.cftc.gov/International/ForeignMarketsandProducts/index.htm
It read to me that citizens could trade CFTC approved products if they were via a member/participant in the U.S.
ChrisApril 18th, 2018 at 9:37am
A US retail trader can trade overseas. That is not the problem. The issue arises whether the derivative is listed on an approved exchange. If it does, you can then trade freely. If it does not, you may not solicit sales of the derivative.
Another wrinkle that a US trader may run into is whether he is a resident of a foreign country. In that case he may not be able to trade the same stocks, etc that he could while residing in a foreign country.
Add a Comment