Binary Options Trading gets illegal claims in Indonesia, This Is The Reason

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Binary Options has now gone viral and become a public conversation after several digital advertisements appeared offering the benefits of this transaction. With the lure of great profits in no time, and can be used by beginners, Binary Options is suddenly loved by the public.

What is Binary Option trading?

HFX International Futures President Commissioner Sutopo Widodo explained that binary options are a form of online trading instrument in which traders predict or guess asset prices rise or fall within a certain time. So, Sutopo says Binary Option is more like gambling than an investment instrument. Playing This Binary Option is pretty easy and simple. Users only need to register with a Binary Option provider and make a deposit. The deposit amount of each provider varies but generally amounts to US$10.

During transactions, users are required to select asset indices, ranging from currencies, stock indices, to commodities. After selecting the asset index, the next user enters the capital to be processed. The minimum amount of capital used depends on the asset.

Then the Binary Option application will calculate the potential profit gained from the transaction. The range is quite diverse, ranging from 60% - 90%. Then, the user chooses the different durations of the transaction, starting from seconds, minutes, hours, or days.

Finally, users are required to guess the duration that has been selected, whether, at the end of the duration, the price of the index is above or below the price when starting the transaction. If the allegations are true, the user will benefit. But if it is wrong, then the capital used will be forfeited and become the user's loss. In Binary Option transactions, there are several different terms with requirements in forex, including Call or High (if the price is expected to go up) and Put or Low (if the price is expected to fall).

Also, there is the term in-the-money if a profit or out-of-money transaction is misestimated. The amount of profit depends on the amount paid by the broker to the trader.

Several binary trading services can be used by the public if they are interested. Starting from Binary.com, Olymp Trade, IQOption.com, Binomo. However, some of these sites cannot be accessed without using a VPN.

We tried to do a simulation on one of the Binary Options platforms. By selecting a EUR/USD asset, the platform offers a duration to choose from: minutes, hours, and days with a minimum duration of one minute. Then, the capital used in this transaction is US$ 5.

After calculating, the platform offers two options: higher or lower than the price when entering. If you choose higher, when in one minute it turns out that the guess is correct, the user will benefit 87.6% of the capital. If you choose lower, and when the guess is correct, the user will benefit 73% of the capital.

However, when the user's guess either higher or lower turns out to be wrong, then the capital already at stake will be forfeited.

Sutopo mentioned that there is a clear difference between forex trading and Binary Option, both in the trading system and its trading methods. For example, for forex trading, there are margin leverage and spreads, while in Binary Option there is none.

"As for the trading system, in forex investors can open, hold & close our positions indefinitely and at any time as long as there is the margin. Whereas in binary, just guessing the price will go up or down in a certain period so that there is an expiration time, either in the condition of loss or profit will be executed immediately," explained Sutopo.

However, Sutopo does not deny that there are advantages to this Binary Option. Starting from a simple and easy method because it only needs to guess. Then the losses obtained are following the capital at stake. Until the absence of swaps and spreads.

However, in each of the advantages of course there are drawbacks. Sutopo called the shortcomings of Binary Option is the inable hold of positions that are at a loss. Then Binary Option is not like other investment products because it relies more on speculation and leads more to gamble.

Then, Sutopo also sees in terms of transparency, the Binary Option is not clear. Especially in price movements in short-term contracts because prices can move a few points in a few seconds to eat up investor positions. Whereas transparency is one of the main factors in investing

"Another drawback is the unclear legality of Binary Option in Indonesia, even in many financial regulators in the world. The main factor is that Binary Option is often regarded as a form of gambling rather than an investment," Sutopo added.

President Director of the Jakarta Futures Exchange (BBJ) Stephanus Paulus Lumintang said legally, Binary Option is arguably illegal. This is because the contract is not included in the contract that has been approved by the Commodity Futures Trading Supervisory Board (Bappebti) as the supervisory body.

"Thus, the current Binary Option application can be categorized as unlicensed by the government. Related to investors who become customers in the application, the investment becomes illegal," explained Paulus

Paul admits to being quite worried about the increasing number of users of applications such as Binary Option because it does not get permission from the government. Moreover, many people do not know and understand the risks associated with the existence and validity of the application.

Therefore, Paul continues to expect the public to be more observant and careful in choosing applications and companies. According to him, people are better to invest in licensed applications or companies in Indonesia.

Head of The Bureau of Legislation and Enforcement Bappebti M.Syist confirmed that until now Bappebti has not regulated regarding Binary Option. So this transaction was declared illegal in Indonesia.

Furthermore, based on Bappebti's profiling database, Syst said that no Binary Option application has been permitted Bappebti. Taking into account the practice of such Binary Options, Bappebti cannot grant permissions to binary option applications.

"With binary option application that has no legality in Indonesia, then in case of a dispute between customer and application provider, Bappebti as a regulator in futures trading cannot facilitate the customer in mediation," said Syisit.

Moreover, the application does not have a representative office in Indonesia that makes no party can be held accountable when the community is harmed. Even if there is an office abroad, according to Syist the legality is not yet certain. This has the potential to make dispute resolution requires not a small number of funds.

In 2020, Bappebti in collaboration with the Ministry of Communication and Information and registrars in Indonesia has blocked as many as 1,191 domain sites of entities that do not have licenses from Bappebti. Of these, several entities are known to perform Binary Option activities, including Binomo, Olymptrade, Expert Option, and IQ Option.

"Transactions made by traders through Binary Option can potentially cause harm to the community. Therefore, to prevent such losses, Bappebti routinely conducts observations and surveillance online," syist said.

While Sutopo believes the rise of Binary Option in Indonesia is in line with massive online advertising and exists on various platforms. This in the end seems to display the message that it is so easy to make a big profit. Moreover, Sutopo sees that Indonesian people are easily lured by something simple, fast, and easy.

"Therefore, the main task of industry players and policymakers is to educate the general public on the world of trading and investment. Investors or traders should understand about the risks of losses that will occur and learn more about the products they choose," sutopo said.

Forex broker and member of indotrader community Zaki Abdulrokim said he used to trade with Binary Option. It was in 2016, Zaki was a beginner interested in playing Binary Option. At that time he was interested because it looked short and easy.

"But playing Binary Option is like betting on time. Different from forex that requires technical and fundamental analysis. After knowing more about the investment world, I immediately left Binary Option," said Zaki.

Zaki learns that an investor has the right to close or hold a position whenever we want, not determined by time. Therefore, Binary Option is considered contrary to the concept.

Zaki is aware that the legality of Binary Option is not based on the law due to the basis of the trading system transactions that do not meet the applicable criteria and conditions. Understanding the risks, he felt uncomfortable and safe from doing things without being protected by clear laws.

"So preferably, novice investors understand in advance how an instrument works and risks. After that, choose a service provider that is already incorporated and recognized for its existence, whether it is from clear and transparent transactions or by brokers registered in Bappebti and Indonesian Futures Clearing," said Zaki.