In March this year (2018), the European Securities and Markets Authority (ESMA) finalised new rules for the online trading sector due to come into effect later this year. The announcement of the changes, and stated justification of why they are believed to be necessary, once again reinforce why Blockchain-powered trading platform Spectre.ai was one of CoinDummies favourite ICOs of 2017. The net result of the new rules is a blanket ban on the sale of binary options to retail traders and tighter restrictions around Contracts for Difference (CFDs) offers. Leverage that can be offered to retail CFDs traders has been slashed and brokers must close out trader positions as soon as the market moving against it means a maximum 50% of the account’s margin could be lost. The move is designed to protect consumers from unscrupulous brokers. UK consumer group Which? has labelled binary options as the country’s ‘biggest investment con’. While there is nothing inherently wrong with the binary options model, its largely unregulated status unfortunately made it a breeding ground for broker fraud and malpractice. Even heavily regulated CFDs brokers have been accused of encouraging traders to take on more risk than suitable.
Why Are New Rules Potentially Fatal To Online Trading Platforms Good for Spectre.ai – A Trading Platform?
So why would restrictions that many brokers are concerned will destroy, or at least badly hurt, their business be positive for a trading platform ICO? Blockchain technology has many potential applications but was initially conceived as the solution to the problem of trusted central authorities being seduced into misusing their position of power as a result of conflicts of interest. This is exactly the unfortunate reality of what provoked the ESMA into its recent ban on binary options trading and strict restrictions on retail-market facing CFDs trading offers. For many traditional binary options brokers, the built-in house edge hasn’t always been considered enough. All too many were corrupted by greed into abusing their position of trust as the central authority of trading platforms. Odds have been further manipulated in the broker’s favour and profitable traders hindered or prevented from making withdrawals. Losing traders have been convinced to make further deposits, often beyond what they could afford to lose, through unscrupulous sales techniques. The consequences of this ‘Wild West’ unregulated binary options market is that a product marketed correctly and brokered honestly would be a simple, fun and educational introduction to financial markets trading has been tarnished as a ‘con’. At least for now, as far as the ESMA is concerned, and many disappointed traders, trust in binary options as a trading instrument has been broken. Spectre.ai decentralises the role of the broker in online trading. A Smart CFDs, Forex and Smart Options ‘predictive betting platform’, it is built on the Ethereum platform. Trading conditions are transparently and immutably set down in smart contracts and the fully automated nature of the platform means no sales team so no risk of hard or miss-selling.
Can Spectre.ai’s Blockchain-Based ‘Trust Protocol’ Save the Binary Options Industry?
No human involvement removes from the equation the ‘broken trust’ that has afflicted the online trading industry. The Blockchain platform means traders’ positions, whether in CFDs, Forex or Smart Options, are matched against other traders with the inverse position where possible. Where inverse trades don’t match up they are made against a decentralised liquidity pool provided by the funds raised through the ICO. This means that there is absolutely no vested interest in whether trades made on Spectre.ai finish in or out of the money. A 4% commission is taken by the platform, 2% of which goes to the platform and 2% to the token holders who either acquired their tokens via the ICO or over a cryptocurrency exchange post-ICO. This means the only financial incentive the platform and token holders have is in increasing the number of trades being executed on Spectre.ai. The issue of trust around client funds held with a broker, and if payouts will actually be processed, is also solved by the decentralised Blockchain solution. Rather than paying into a brokerage account, on Spectre.ai, traders fund their positions directly from their own cryptocurrency wallet. Any returns realised also go straight back into the wallet. It’s also possible to hold funds on the platform through a secure private smart contract but, again, the platform has no access to these funds. Dubious hard sales practises, mis-selling or encouraging traders to operate beyond their means is also neatly side-stepped as an issue. Because the decentralised nature of the platform means there is no human involvement in its day-to-day running there is also, therefore, no sales team. Blockchain has been described as a ‘trust protocol’. For an industry that has been marred exactly because trust has broken down, Blockchain appears to offer the perfect solution. We were convinced of the merits of this particular ICO at the time of its launch last year. The subsequent market developments and recent ESMA ban on binary options, along with the restrictions to CFDs, further reinforces that initial judgement on Spectre.ai. Because Spectre.ai traders open positions using Ethereum or Bitcoin as base currencies, converted into fiat currencies on the platform itself, the ESMA ban has no jurisdiction. The Blockchain ‘protocol of trust’ solution offered by Spectre.ai may just be the way to save a doomed industry spoiled for everyone by the greed of some while simultaneously removing the potential for a future repetition of that breach of trust. The ESMA ban also opens up a market of keen European binary options traders looking for a new broker. Why wouldn’t they choose the platform they know ensures they will trade in an objectively fair environment?