Japanese Binary Volumes Improve on Brexit Interest
Japanese volumes provide a much-needed boost as they bounce off record low volumes. The increase can be ascribed to Brexit as the GBP/JPY was the biggest mover.
Japanese binary volumes improve as they come off the record low set in May. Brexit has provided a shot in the arm with the GBP/JPY volumes increasing from ¥10trillion in May to ¥14trillion in July, a 40% increase.
Nevertheless, July ’16 volumes are still below both those of one year ago (¥48.76trillion) and two years ago (¥53.79trillion).
Binary Options Volumes by Currency Pairs
The following graphic illustrates the impact of Brexit on the different pairs.
Both the GBP/JPY and EUR/JPY combined show a marked improvement in volumes since May, the month preceding the Brexit result. A further concern is the steady lack of interest since the beginning of the year in the USD/JPY exchange rate which hit a nadir in June with volumes of just ¥14.27trillion, the second lowest volume recorded. This decline has been offset to a small extent by the AUDJPY exchange rate which has taken up some of the slack.
Decline in Active Accounts
The decline in active accounts as shown by the following graph is a reflection of the poor returns that the seven binary options providers offer.
The decline in the active accounts has to be a big worry for the brokers offering binary options. Although the volume per account declined for the first four months the Brexit effect would appear to have given this metric a boost. Yet if the Brexit effect is short-term and the active accounts continue to decline, then overall volume will continue to drop off.
Poor Payouts on Offer
The following three graphics illustrate the low percentage of winning customers over a month.
The sad conclusion to be drawn from the first illustration which covers vanilla binary options is that if less than 75% of the customers lose then the broker’s performance is bad. Indeed, JFX pulled out of the binary market completely during April and yet they had only five months out of twenty-five when their customers ‘won’. The average number of winning customers for the remaining brokers over the thirty-one months for vanilla binary options is under 25% at 24.78%. This low number is unsustainable assuming the client base does not have an IQ of a mosquito!
The ‘Range Options Winning Customers’ and ‘ ‘Touch Options Winning Customers’ have only two providers which is pathetic, particularly so when the Range is the equivalent of a conventional call spread in structure, i.e. long one call, short another call, and is therefore a less risky instrument to trade than an outright binary call option. Neither instruments have registered a ‘losing’ month in the last year so one must assume that the ‘non-combatants’ amongst the brokers just don’t have a clue in how to price and risk manage these instruments, otherwise, surely, they too would be ‘making hay….’.
Structural Market Problems
According to the ‘GUIDELINES FOR OVER-THE-COUNTER BINARY OPTION TRANSACTION WITH INDIVIDUAL BUSINESS CONDUCT RULES’, the binary options contract must have a ‘base’ length of at least two hours. When the off-shore operators are offering ‘base’ length contracts of as little as a minute then it would appear that some binary traders are preferring to abandon the ‘safe’ regulated market in favour of the ‘unsafe’ offshore market. It is difficult to ascertain why this two hour minimum limit has been imposed, especially when High Frequency Traders (HFTs) trade in nano-seconds and are considered bona fide ‘investors’.
Gaining a license to offer binaries in Japan has become increasingly difficult. This has no doubt lead to a decrease in competition between the binary options providers, which in turn leads to less competitively priced options.