Binary Options Trading in Sri Lanka
Sri Lanka is located in South East Asia and is in close proximity to Indonesia, Singaore and Malaysia. The country is just coming out of a long-drawn civil war, and its financial systems are not as developed as those of some of its more advanced neighbours. This has not deterred its young population from seeking out more trading opportunities outside the conventional stock market.
Sri Lanka’s financial markets are regulated by the Securities and Exchange Commission of Sri Lanka, with oversight function provided by the Central Bank of Sri Lanka (CBSL). The two organizations work hand in hand to regulate the financial services industry and financial markets. The SEC is responsible for licensing and registration of brokers in the stock market, underwriters, margin providers and unit trusts. The Central Bank controls the process of securing foreign exchange and the payment systems within the financial system.
“Over the years, Sri Lanka has been bedevilled with a huge problem of pyramid schemes, causing those who lodge money with those schemes to lose colossal sums of money. As such, the regulatory agencies in Sri Lanka are predisposed to licensing and regulating only companies that operate in the conventional markets such as the stock market”
By the definition of a circular released in 2012 from the CBSL’s Exchange Control Department, remittance of foreign exchange for the purpose of any form of speculative trading is considered illegal.
The Central Bank wishes to inform the general public that undertaking foreign exchange trading transactions and remitting payments outside Sri Lanka for such transactions by any person without the approval of the Central Bank is illegal and violation of the provisions of section 5(1) and 7(a) of the Exchange Control Act. This is considered as a punishable offence under the Exchange Control Act and we request general public not to fall prey to such transactions.
The regulation of the financial markets in Sri Lanka is performed both by the SEC and the CBSL. As identified in the previous chapter, all trading activity which involves the sending of foreign exchange to companies or entities outside the country for the purpose of individual trading is prohibited by law. The CBSL went ahead to characterize the companies it referenced in the circular, referring to them as “companies and proprietary concerns” that regularly use employees and agents to send out adverts, or cold call members of the public to pre-sell them on undertaking financial trading with promises of high returns.
Apparently, only corporate entities are allowed to engage in forex and binary options online trading with offshore institutions, and only by approval of the CBSL. Retail trading is prohibited in Sri Lanka.
Currency Pairs & Spread
The Sri Lankan Rupee is not traded on international platforms. Therefore, Sri Lankan traders looking for familiar assets can really only trade the currency pairs and assets of the Asian region. Those who want to trade assets that emanate from other regions of the world will have to do a lot of study to familiarize themselves with these assets.
Sri Lankan binary options online traders mostly do business with companies that have local agents in the country. Majority of these brokers use the cheaper turnkey platforms.
The companies that operate with local agents are able to offer Sri Lankan traders with bonuses. These companies do not operate in jurisdictions where bonuses are prohibited. The local introducing agents usually have a mandate to negotiate bonuses with traders. Sri Lankan traders should use these bonuses wisely.
Deposit and Withdrawal Options
Deposits and withdrawals in Sri Lanka take some specific forms. The commonest form involves the deposit of the initial investment capital in the local currency (Sri Lanka rupees) with an individual or corporate agent of the offshore broker. These amounts are then transferred to the trader’s online account using the following means:
- Credit and debit cards.
- Electronic funds transfer card direct to an online account opened in the investor’s name.
- International digital wallets such as Skrill or Neteller.
Working with local agents is the preferred method of transaction because foreign exchange purchases and movement outside the country is tightly controlled by the CBSL, making it very difficult for traders to deposit and withdraw funds using the conventional means available to traders of other countries.
Legality & Regulations
What are the legal considerations attached to the conduct of binary options online brokerage and trading in the Sri Lanka? There is a law in Sri Lanka known as the Exchange Controls Act, which controls how money can be remitted and received from abroad. This law also has provisions which specifically prohibit the trading of speculative assets with brokers located overseas. Forex and binary options online trading is therefore prohibited in and out of Sri Lanka.
Here are the frequently asked questions that most users may have about the binary options online industry in Sri Lanka.
- Are binary options online legal in Sri Lanka?
Answer: Binary options trading in Sri Lanka is illegal, according to the Central Bank of Sri Lanka. However, the level of enforcement of this ban appears not to be working because many Sri Lankan traders are still trading binary options online with offshore brokers.
- Is it safe to trade binary options online in Sri Lanka?
Answer: Sri Lankan binary option trading is increasing in popularity, but so has the cases of scams by unregulated brokers who have exploited the relative naivety of the local population to perpetrate their fraudulent schemes. Binary option trading is not very safe in Sri Lanka.
- As a Sri Lankan citizen, am I allowed to trade binary options online with offshore brokers?
Answer: Sri Lankans still trade with offshore brokers, but mostly work with introducing agents of offshore brokers. This is because there are laws prohibiting retail binary options online trading and moving funds offshore for this purpose is difficult.
Best Binary Options Brokers in Sri Lanka
There are no top binary options online brokers in Sri Lanka. The CBSL and SEC have not licensed any company to provide binary options online products and this will probably not change anytime soon. However, Sri Lankan traders are still patronizing offshore binary options online brokers by using local agents and introducing brokers. As a Sri Lankan binary options online trader, you would want to trade with a broker that is regulated, offers some friendly local language options and provides an ability to deposit and withdraw funds seamlessly.
Binary options trading in Sri Lanka is prohibited, as well as is the advertising of these products. Many industry watchers feel that the prohibition is not attacking the issues from the root. Sri Lanka has suffered from several Ponzi schemes, and this has forced the CBSL’s hand. The CBSL maintains a database of licensed commercial banks and finance houses, which it classifies as the only companies that can function to take deposits from Sri Lankans. To complement this, the SEC also maintains a list of companies licensed to offer financial products to the Sri Lankan public. These lists contain no forex or binary option brokers.
Sri Lankan traders therefore have to exercise maximum caution, not just to prevent falling into the hands of unregulated entities, but also from falling foul of the Exchange Control Act.