Rating Brokers Formula V.3.0

OPTIONS BROKERS RATING FORMULA 3.0

 

Note: there is a newer version available in this site

 

What is about?

The introduction of the Rating Formula is serving the mission to provide an objective framework to valuate world online brokers. Until now online brokerage services were valuated and rated only by users. But most user ratings in the trading industry don’t seem to be honest. Anyone who has an incentive may produce a fake review / or rating. Prove derives from the fact that most user ratings take extreme values like 5/5 or 0/5. It seems like most of these ratings are not made by real users. We must note that User-Rating sites like Forex Peace Army do their best to ensure that user ratings are not fake, but given the results, it seems like extremely difficult task. Using an objective way with common rules to rate and compare brokers is what the Rating Brokers Formula is all about. Maybe someday in the future, regulatory authorities in the internet will use a similar formula to control and to force brokers to operate in a way favour to internet users. Furthermore, to force brokers to act in the direction of minimizing the whole systemic risk of the industry.

History:

The first and the second versions of the Rating Broker Formula were applied on Online Forex Brokers. More information here:

» Binary Option Brokers Formula -V.3.5, BinaryValue.com

» Binary Option Brokers Formula -V.3.0, BinaryValue.com

» Forex Broker Rating Formula –V.2.0, TradingCenter.org

» Forex Broker Rating Formula –V.1.0, OnlineForex.Biz

 Rating Brokers Formula v.3.0

World Brokers Rating Formula V.3.0

-Implemented on Binary Options Brokers 

 

The rating formula v.3 is build by linking together four major trading factors:

 

1) The Maximum Safety of Funds

2) The Minimum Commissions and Fees Charged

3) The Maximum Number of Trading Options

4) The Maximum Technological Efficiency

 

 

FACTOR 1) Safety of Funds, Weight 20%

When trading online, ensuring the safety of your funds becomes the most crucial factor to consider before you open a real trading account. Financial companies (investment companies, brokerages etc) sometimes tend to accept risky decisions in order to gain market share or boost their company’s profitability. That is against the interest of their traders who are by nature risk-averse concerning their funds safety. In order to measure credibility some rating filters have been developed.

Table-1: Safety of Funds Analysis

1. RELIABILITY

WEIGHING ANALYSIS

MAXIMUM WEIGHT

1.1 Years in the Market

0-1 Years = 0%, 1-3 Years = 6.0%, 3-5 Years = 8.0%, 5+ Years = 10.0%

10.00%

1.2 Headquarters Base

Offshore = 1.0%, Cyprus = 5.0%, Ireland, Australia = 8.0%, USA, UK, Germany, France, Switzerland = 10.0%

10.00%

1.3 Level of Regulation

FSC (BVI) = +1.0%, CYSEC = +3.0%, CBI = +4.0%, ASIC = +4.0%, BaFIN = +5.0%, FSA (UK) = +5.0%, FINMA = +5.0%

(+5% max)

1.4 US Traders

Yes = +2.0% or No = +0%

(+2% max)

 

TOTAL =    

20.0%

 

FACTOR-1 ANALYSIS:

1.1 Years in the Market, 10%

Many years in the market indicate that a Binary Option Company operates under a successful business model and that it is proven capable of managing the whole enterprising risk over time.

1.2 Headquarters Base, 10%

The country where a binary option broker maintains headquarters determines the quality and consistency of its balance sheet. Fees and penalties imposed by supervising authorities provide a strong incentive for Options Brokers to operate legitimately without risking their client funds.

1.3 Regulation, (+5%)

As the Binary Options Industry is very young, regulation is not yet an industry standard. Lately, some Binary Options Brokers have managed to achieve some basic regulation, so this factor is also incorporated to our ratings. An extra rating (up to 5%) is added to those Binary Options Brokers who are supervised by a trusty regulatory authority.

1.4 US Residents Allowance, (+2%)

The acceptance of US residents indicates compatibility with US regulation, which after 2008 became strict for financial companies. US regulation adds credibility to a Binary Option Broker operation.

 

 

FACTOR 2) Competition, Weight 35%

 

The level of competition in the Binary Option Industry is very crucial for traders. High payout and refund rate determines in a high extend the success of trading Binary Options online.

Table-2: Competition Analysis

2. COMPETITION

WEIGHING ANALYSIS

MAXIMUM WEIGHT

2.1 Max Offering Payout Rate

Payout Rating = {(Actual Max Payout Rate) x 3} / 10

30.00%

2.2 Max Refund Rate

Refund Rating = (Actual Max Refund Rate) / 2

-NOTE: {2.1 + 2.2 = max 30%}

(+5% max)

2.3 Commissions on Deposits / Withdrawals

Yes=0 or No=2.0%

2.00%

2.4 Customer Service Quality

24/7 = 1%, 24/6 = 0.5%, 24/5 = 0%, eMail = 1.0%, Phone = 1.0%.

Live Chat = 1.0%, Skype = 1.0%

3.0

 

TOTAL =

35.0%

   
 

 

FACTOR-2 ANALYSIS:

2.1 Payout Rate, 20%

The Payout Rate is by far the most important factor when trading binary options. Eventually, this particular factor {2.1} is weighed 20%.

2.2 Refund Rate, (+5%)

The rate of Refund adds extra value to the profit potential of each Binary Option Trader, so factor 2.2 may add up to 5% in the overall rating of any Binary Option Broker.

2.3 Deposit / Withdrawal Commissions, 2%

Deposit and Withdrawal commissions are progressively reducing trading funds, so the factor 2.3 is incorporated in our ratings. Binary Option Brokers who are not charging any commissions are rated beneficially by 2% compared to other brokers who are charging commissions and fees.

2.5 Customer Service Quality, 3%

Online services require by nature the existence of a high quality customer service. 24/7 and 24/6 customer service is rated, bu additionally the existence of services like eMail support, Phone support, Skype support and Live Chat support.

 

 

FACTOR 3) Trading Options, Weight 38%

 

Every trader has a different profile with different needs so the quantity and the quality of trading options are highly weighed in our ratings. The number of trading assets offered by the Binary Option Broker is certainly the most crucial factor but other trading options are rated too, like the number of Deposit and Withdrawal methods.

Table-3: Trading Options

3. TRADING OPTIONS

WEIGHING ANALYSIS

MAXIMUM WEIGHT

3.1 Forex Currencies

20+ Stocks & Indices = 8.0%, 15+ Stocks & Indices = 6.0%, 10+ Stocks & Indices = 4.0%, 5+ Stocks & Indices = 2.0%, 1+ Currency Pair = 1.0%, No Forex Pairs = 0%

8.00%

3.2 Commodities & Energy Offered

Commodities = 4.0%, Energy = 4.0% = Total = 8.0%

8.00%

3.3 Stocks & Indices Offered

20+ Stocks & Indices = 8.0%, 15+ Stocks & Indices = 6.0%, 10+ Stocks & Indices = 4.0%, 5+ Stocks & Indices = 2.0%, 1+ Stock or Index = 1.0%, No Stocks or Indices = 0%

8.00%

3.4 Bonus / Rebate Rate

Bonus >40% = 10.0%, >35% = 9.0%, >30% = 8.0%, >25% = 7.0% >20% = 6.0%, >15% = 5.0%, >10% = 2.5%

10.00%

3.5 Number of Deposit Methods

For each deposit method available = 0.5%

2.00%

3.6 Number of Withdrawal Methods

For each deposit method available = 0.5%

2.00%

 

TOTAL =

38.0%

 

 

FACTOR-3 ANALYSIS:

 

3.1 Available Number of Currency Pairs, 8%

Forex trading, and especially the EUR/USD pair, is very popular among traders nowadays. The higher the number of Forex pairs available, the higher the potential for traders to exploit trading opportunities.

3.2 Available Number of Commodities and Energy, 8%

Trading metals like Gold and Silver and energy like the price of Oil became very popular the last decade. As concerns gold, the existence of gold-based assets in a portfolio reduces the overall risk and constitute a way of differentiating long-term portfolio value.

3.3 Available Stocks & Indices, 8%

Trading Stocks & Indices is widely used among Binary Option Traders. Especially as concerns shares of companies like Apple, Facebook and Google and Indices like Nasdaq.

3.4 Bonus / Rebate, 10%

The higher the bonus offered by a binary option broker, the larger are the trader’s available funds.

3.5 Deposit Methods, 2%

Wide variety of Deposit Methods means a broker is willing to become more suitable to his customers needs.

3.6 Withdrawal Methods, 2%

The wide variety of withdrawing methods is of equal importance.

 

  

FACTOR 4) Technology & Innovation, Weight 7%

 

Technological efficiency is very important when trading online.

Table-4: Technology and Innovation

4. TECHNOLOGY

WEIGHING ANALYSIS

MAXIMUM WEIGHT

4.1 Rollover Feature

Yes = 2.0% or No = 0%

2.00%

4.2 One Touch Options

Yes = 2.0% or No = 0%

2.00%

4.3 Mobile Devices Supported

Each Supported Device = 1% (iPhone, iPad, Android, Windows Mobile, Blackberry), max=3 devices

3.00%

 

TOTAL =

7.0%

 

FACTOR-4 ANALYSIS:

4.1 Rollover Feature Availability, 2%

Rollover provides traders the ability to widen their trading time frame. Rollover actually allows a trade expiration to be postponed and therefore constitute an advantage for binary options traders.

4.2 One Touch Binary Options, 2%

One Touch Binary Options which are also known as boundary options provide traders the ability to early capitalize their gaining. One-Touch Binary Options earn a payout if an asset reaches a targeted price even before the predefined expiration.

4.3 Mobile Trading, 3%

Mobile trading is not just a trend nowadays, it is simply the future of trading. Every mobile device that is supported means that more traders will able to execute trades anywhere and anytime.

 

TOTAL RATING {FACTORS 1, 2, 3 and 4}

 

Total Rating: By adding the 4 parts of the rating formula, we get the Total Rating of each Binary Option Broker. 

TOTAL RATING=

Realibility / Safety of Funds (20.0%) +

Competition / Trading Cost (35.0%) +

Quality and Quantity of Trading Options Offered (37.0%) +

Technology Offered(7.0%)

= (100.0%)

 

Binary Value Rating Brokers Formula v.3.0 (2012-2013) 

 Giorgos Protonotarios
Investment Consultant / Financial Analyst
Msc in “International Banking & Finance” 
 
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