A brief insight into the evolutionary history of binary options
The history of binary options dates back to the 1970s, when it was started as a semi-banking instrument that was accessible to a select few. The existent traditional trading methods were over-the-counter-type (OTC) with no regulations to give it a form or structure.
Added to the trading system in 1970s, Binary options trading have continued to evolve ever since with two revolutionary changes taking place in 1973 and 2008 respectively. Binary options trading got a facelift when it was added to the list of trading options of the Chicago Board Options Exchange (CBOE) an offshoot of the Chicago Board of Trade in 1973, making it a part of the financial exchange market, which subsequently made it necessary for binary options to be governed by the rules and regulations of the financial trading industry. The penalty implications if rules were broken limited its use to an exclusive group of traders, thereby restricting the over-the-counter access to individual investors, who would have to then hire the services of a broker at a certain fees to get access.
This changed in 2008, when the Option Clearing Corporation (OCC) started listing binary options as over-the-counter product making it easily accessible to individual traders. This not only ensured that the transactions are more secure but also brought in stringent rules that could even lead to temporary or permanent ban on the investor following noncompliance to the regulations.
The American stock exchange soon followed suit allowing people to trade online thus making it accessible to anyone with an internet connection and an online account. The Chicago Board Options Exchange and the North American Derivatives Exchange (NADEX) soon joined the ranks of other leading stock exchanges in doing the same and therefore turned what was till then a closed trading market to an open trading market. ‘Trade online’ seems to be the new tag line for binary options trading which has come a long way from being an exclusive/selective banking instrument to an all inclusive /open trading instrument. Online trading facilitates trading in binary options without signing a contract; a far cry from the traditional trading, where the buyer would have to sign a contract with a set expiry date, based on his predictions of the future value of the stocks.